December 21, 2008
Op-Ed Columnist
China to the Rescue? Not!
By THOMAS L. FRIEDMAN
Hong Kong
I had no idea that many of those oil paintings that hang in hotel rooms and starter homes across America are actually produced by just one Chinese village, Dafen, north of Hong Kong. And I had no idea that Dafen’s artist colony — the world’s leading center for mass-produced artwork and knockoffs of masterpieces — had been devastated by the bursting of the U.S. housing bubble. I should have, though.
“American property owners and hotels were usually the biggest consumers of Dafen’s works,” Zhou Xiaohong, deputy head of the Art Industry Association of Dafen, told Hong Kong’s Sunday Morning Post. “The more houses built in the United States, the more walls that needed our paintings. Now our business has frozen following the crash of the Western property market.”
Dafen is just one of a million Chinese and American enterprises that constitute the most important economic engine in the world today — what historian Niall Ferguson calls “Chimerica,” the de facto partnership between Chinese savers and producers and U.S. spenders and borrowers. That 30-year-old partnership is about to undergo a radical restructuring as a result of the current economic crisis, and the global economy will be highly impacted by the outcome.
After all, it was China’s willingness to hold the dollars and Treasury bills it had earned from exporting to America that helped keep U.S. interest rates low, giving Americans the money they needed to keep buying shoes, flat-screen TVs and paintings from China, as well as homes in America. Americans then borrowed against those homes to consume even more — one reason we enjoyed rising wealth without rising incomes.
This division of labor not only nourished our respective economies, but also shaped our politics. It enabled China’s ruling Communist Party to say to its people: “We will guarantee you ever-higher standards of living and in return you will stay out of politics and let us rule.” So China’s leaders could enjoy double-digit growth without political reform. And it enabled successive U.S. administrations, particularly the current one, to tell Americans: “You can have guns and butter — subprime mortgages with nothing down and nothing to pay for two years, ever-higher consumption and two wars, without tax increases!”
It all worked — until it didn’t.
With unemployment now soaring across the U.S., said Stephen Roach, the chairman of Morgan Stanley Asia, Americans — “the most over-extended consumer in world history” — can no longer buy so many Chinese exports. We need to save more, invest more, consume less and throw out most of our credit cards to bail ourselves out of this crisis.
But as that happens, we need China to take our discarded credit cards and distribute them to its own people so they can buy more of what China produces and more imports from the rest of the world. That’s the only way Beijing can sustain the minimum 8 percent growth it needs to maintain the political bargain between China’s leaders and led — not to mention pick up some of the slack in the global economy from America’s slowdown.
However, if I’ve learned one thing here, it’s just how hard doing that will be. China’s whole system and culture nourish saving, not spending, and changing that will require a huge “cultural and structural” shift, said Fred Hu, chairman for Greater China for Goldman Sachs.
In China, for instance, to buy a home you have to put at least 20 percent down, and the average is 40 percent. If you try to walk away from the mortgage, the bank will come after your personal assets. Moreover, China can’t just shift production from the U.S. market to its own consumers. Not many Chinese villagers want to buy $400 tennis shoes or Christmas tree ornaments.
Also, China has no real Social Security, health insurance or unemployment insurance. Without that social safety net, it’s hard to see how Chinese don’t end up saving most of their stimulus. “You open up the newspaper every day and you hear about this factory shutting down or that supplier going belly up,” said Willie Fung, whose company, Top Form International, is the world’s leading bra maker. “You can never be too careful in this financial climate.”
As such, “the world should not have a false hope that China can cushion the global downturn,” by stimulating its domestic demand in a big way, said Frank Gong, head of China research for JPMorgan Chase. “The best thing China can do is keep its own economy stable.”
It’s good advice. China is not going to rescue us or the world economy. We’re going to have to get out of this crisis the old-fashioned way: by digging inside ourselves and getting back to basics — improving U.S. productivity, saving more, studying harder and inventing more stuff to export. The days of phony prosperity — I borrow cheap money from China to build a house and then borrow on that house to buy cheap paintings from China to decorate my walls and everybody is a winner — are over.
FORMS OF GOVERNANCE
December 22, 2008
Editorial
A New Respect for Science
Though Barack Obama’s cabinet appointments have received the big headlines, it is worth noting two important sub-cabinet choices. Both are scientists, committed to using rather than abusing science to address issues like climate change, and a welcome departure from the many ideologues and lobbyists that Dick Cheney assembled to advise President Bush on environmental matters.
The first of these choices is Jane Lubchenco, a marine biologist at Oregon State University, to run the National Oceanic and Atmospheric Administration, a division of the Commerce Department responsible for the health of the atmosphere and the oceans.
Ms. Lubchenco is an expert on two grave threats to the oceans, both linked to global warming. One is acidification, which is destroying coral reefs, the other hypoxia, a condition that robs fish of the oxygen they need to survive. She has also been a powerful advocate for stronger federal and international efforts to protect declining fish species.
We are also heartened by Mr. Obama’s choice of John Holdren, a Harvard physicist, as his science adviser. Mr. Holdren has served as chairman of the American Association for the Advancement of Science, as has Ms. Lubchenco. Both have argued strongly and repeatedly for a mandatory limit on greenhouse gases to avoid catastrophic climate change.
Like Mr. Obama’s earlier appointments — in particular Steven Chu, a Nobel laureate in physics, to run the Department of Energy — these choices solidly affirm Mr. Obama’s commitment to aggressively address the challenges of energy independence and global warming.
The broader point, though, is what they say about his appreciation for the processes of science. That was not much in evidence in the Bush administration, some of whose appointees edited and suppressed scientific documents to serve the administration’s political agenda.
As Ms. Lubchenco observes, identifying a problem is not synonymous with solving it. But Mr. Obama has at least surrounded himself with serious scholars of some of the most critical issues of our times.
Editorial
A New Respect for Science
Though Barack Obama’s cabinet appointments have received the big headlines, it is worth noting two important sub-cabinet choices. Both are scientists, committed to using rather than abusing science to address issues like climate change, and a welcome departure from the many ideologues and lobbyists that Dick Cheney assembled to advise President Bush on environmental matters.
The first of these choices is Jane Lubchenco, a marine biologist at Oregon State University, to run the National Oceanic and Atmospheric Administration, a division of the Commerce Department responsible for the health of the atmosphere and the oceans.
Ms. Lubchenco is an expert on two grave threats to the oceans, both linked to global warming. One is acidification, which is destroying coral reefs, the other hypoxia, a condition that robs fish of the oxygen they need to survive. She has also been a powerful advocate for stronger federal and international efforts to protect declining fish species.
We are also heartened by Mr. Obama’s choice of John Holdren, a Harvard physicist, as his science adviser. Mr. Holdren has served as chairman of the American Association for the Advancement of Science, as has Ms. Lubchenco. Both have argued strongly and repeatedly for a mandatory limit on greenhouse gases to avoid catastrophic climate change.
Like Mr. Obama’s earlier appointments — in particular Steven Chu, a Nobel laureate in physics, to run the Department of Energy — these choices solidly affirm Mr. Obama’s commitment to aggressively address the challenges of energy independence and global warming.
The broader point, though, is what they say about his appreciation for the processes of science. That was not much in evidence in the Bush administration, some of whose appointees edited and suppressed scientific documents to serve the administration’s political agenda.
As Ms. Lubchenco observes, identifying a problem is not synonymous with solving it. But Mr. Obama has at least surrounded himself with serious scholars of some of the most critical issues of our times.
December 27, 2008
Op-Contributor
Put Culture in the Cabinet
By WILLIAM R. FERRIS
Chapel Hill, N.C.
IN 1935, as part of the New Deal, President Franklin Roosevelt created the Farm Security Administration, which reached out to rural families as they struggled during the Depression. Roy Stryker, who oversaw the agency’s photo documentary program, captured the strength of American culture in the depths of the country’s despair. The photographs of Walker Evans, Dorothea Lange and Gordon Parks showed us both the pain of America and the resilience of its people.
In 1965, President Lyndon Johnson drew on his Texas roots when he created the National Endowment for the Arts and the National Endowment for the Humanities, organizations that share America’s arts and humanities with the American people.
Both Roosevelt and Johnson demonstrated their forceful commitment to the preservation and celebration of American culture — and they did so in challenging times.
So what will President-elect Barack Obama do? Well, here’s a suggestion.
Over the years, America has developed an impressive array of federal cultural programs — in addition to the endowments for the arts and the humanities. These include the Corporation for Public Broadcasting, the Institute of Museum and Library Services, the Library of Congress, the National Archives, NPR, PBS and the Smithsonian Institution.
Each of these organizations has helped preserve our nation’s rich folklore — its music, stories and traditional arts — as a uniquely powerful voice for our culture.
But as chairman of the National Endowment for the Humanities from 1997 to 2001, I learned firsthand that these institutions, though united by a shared goal, can sometimes run into conflict with one another. There were bureaucratic tangles, overlaps and missteps that, with foresight, could have been avoided.
Which is why I believe the president should create a cabinet-level position — a secretary of culture — to provide more cohesive leadership for these impressive programs and to assure that they receive the recognition and financing they deserve.
The president should initiate another change, too. The leaders of our cultural institutions should all have renewable 10-year appointments. (Some now serve only four-year terms.) Such a change would help to provide continuity and insulate the organizations from the tumult of political change. This move would allow each agency to develop long-term agendas in coordination with the secretary of culture in each administration.
Mr. Obama has an opportunity to revitalize our national spirit by strengthening our cultural programs at every level. It’s hard to imagine what could be a more important — and enduring — legacy.
William R. Ferris is the senior associate director of the Center for the Study of the American South at the University of North Carolina at Chapel Hill.
*****
December 27, 2008
Op-Ed Columnist
Stop Being Stupid
By BOB HERBERT
http://www.nytimes.com/2008/12/27/opini ... nted=print
I’ve got a new year’s resolution and a new slogan for the country.
The resolution may be difficult, but it’s essential. Americans must resolve to be smarter going forward than we have been for the past several years.
Look around you. We have behaved in ways that were incredibly, astonishingly and embarrassingly stupid for much too long. We’ve wrecked the economy and mortgaged the future of generations yet unborn. We don’t even know if we’ll have an automobile industry in the coming years. It’s time to stop the self-destruction.
The slogan? “Invest in the U.S.” By that I mean we should stop squandering the nation’s wealth on unnecessary warfare overseas and mindless consumption here at home and start making sensible investments in the well-being of the American people and the long-term health of the economy.
The mind-boggling stupidity that we’ve indulged in was hammered home by a comment almost casually delivered by, of all people, Bernie Madoff, the mild-mannered creator of what appears to have been a nuclear-powered Ponzi scheme. Madoff summed up his activities with devastating simplicity. He is said to have told the F.B.I. that he “paid investors with money that wasn’t there.”
Somehow, over the past few decades, that has become the American way: to pay for things — from wars to Wall Street bonuses to flat-screen TVs to video games — with money that wasn’t there.
Something for nothing became the order of the day. You want to invade Iraq? Convince yourself that oil revenues out of Baghdad will pay for it. (Meanwhile, carve out another deficit channel in the federal budget.) You want to pump up profits in the financial sector? End the oversight and let the lunatics in the asylum run wild.
For those who wanted a bigger house in a nicer neighborhood, there were mortgages with absurdly easy terms. Credit-card offers came in the mail like confetti, and we used them like there was no tomorrow. For students stunned by the skyrocketing cost of tuition, there were college loans that could last a lifetime.
Money that wasn’t there.
Plenty of people managed their credit wisely. But much of the country, including many of the top government officials and financial titans who were supposed to be guarding the nation’s wealth, acted as if there would never be a day of reckoning, a day when — inevitably — the soaring markets would crash and the bubbles explode.
We were stupid in so many ways. We shipped American jobs overseas by the millions and came up with the fiction that this was a good deal for just about everybody. We could have and should have taken the time and made the effort to think globalization through, to be smarter about it and craft ways to cushion its more harmful effects and to share its benefits more equitably.
We bought into the dopey idea that you could radically cut taxes and still maintain critical government services — and fight two wars to boot!
We were living in a dream world. The general public, and to a great extent the press, closed its eyes to the increasingly complex and baffling machinations of the financial industry, which kept screaming that oversight would ruin everything.
We should have known better. It didn’t require a genius (or even an economics degree) to understand a crucial point that popped up some years ago in a front-page article in The Wall Street Journal: “Markets are a great way to organize economic activity, but they need adult supervision.”
Did Alan Greenspan not understand that? Bob Rubin? Larry Summers?
Now that the reality of a stunning economic downturn has so roughly intervened, we at least have the option of being smarter going forward. There is broad agreement that we have no choice but to go much more deeply into debt to jump-start the economy. But we have tremendous choices as to how we use that debt.
We should use it to invest in the U.S. — in a world-class infrastructure (in its broadest sense) to serve as the platform for a world-class, 21st-century economy, and in a system of education that actually prepares American youngsters to deal successfully with the real world they will be encountering.
We need to invest in a health care system that improves the quality of American lives, enhances productivity, puts large numbers of additional people to work and eases the competitive burden of U.S. corporations.
We need to care for our environment (if long-term survival means anything to us) and get serious about weaning ourselves from foreign oil.
And, finally, we need to start living within our means and get past the nauseating idea that the essence of our culture and the be-all and end-all of the American economy is the limitless consumption of trashy consumer goods.
It’s time to stop being stupid.
Op-Contributor
Put Culture in the Cabinet
By WILLIAM R. FERRIS
Chapel Hill, N.C.
IN 1935, as part of the New Deal, President Franklin Roosevelt created the Farm Security Administration, which reached out to rural families as they struggled during the Depression. Roy Stryker, who oversaw the agency’s photo documentary program, captured the strength of American culture in the depths of the country’s despair. The photographs of Walker Evans, Dorothea Lange and Gordon Parks showed us both the pain of America and the resilience of its people.
In 1965, President Lyndon Johnson drew on his Texas roots when he created the National Endowment for the Arts and the National Endowment for the Humanities, organizations that share America’s arts and humanities with the American people.
Both Roosevelt and Johnson demonstrated their forceful commitment to the preservation and celebration of American culture — and they did so in challenging times.
So what will President-elect Barack Obama do? Well, here’s a suggestion.
Over the years, America has developed an impressive array of federal cultural programs — in addition to the endowments for the arts and the humanities. These include the Corporation for Public Broadcasting, the Institute of Museum and Library Services, the Library of Congress, the National Archives, NPR, PBS and the Smithsonian Institution.
Each of these organizations has helped preserve our nation’s rich folklore — its music, stories and traditional arts — as a uniquely powerful voice for our culture.
But as chairman of the National Endowment for the Humanities from 1997 to 2001, I learned firsthand that these institutions, though united by a shared goal, can sometimes run into conflict with one another. There were bureaucratic tangles, overlaps and missteps that, with foresight, could have been avoided.
Which is why I believe the president should create a cabinet-level position — a secretary of culture — to provide more cohesive leadership for these impressive programs and to assure that they receive the recognition and financing they deserve.
The president should initiate another change, too. The leaders of our cultural institutions should all have renewable 10-year appointments. (Some now serve only four-year terms.) Such a change would help to provide continuity and insulate the organizations from the tumult of political change. This move would allow each agency to develop long-term agendas in coordination with the secretary of culture in each administration.
Mr. Obama has an opportunity to revitalize our national spirit by strengthening our cultural programs at every level. It’s hard to imagine what could be a more important — and enduring — legacy.
William R. Ferris is the senior associate director of the Center for the Study of the American South at the University of North Carolina at Chapel Hill.
*****
December 27, 2008
Op-Ed Columnist
Stop Being Stupid
By BOB HERBERT
http://www.nytimes.com/2008/12/27/opini ... nted=print
I’ve got a new year’s resolution and a new slogan for the country.
The resolution may be difficult, but it’s essential. Americans must resolve to be smarter going forward than we have been for the past several years.
Look around you. We have behaved in ways that were incredibly, astonishingly and embarrassingly stupid for much too long. We’ve wrecked the economy and mortgaged the future of generations yet unborn. We don’t even know if we’ll have an automobile industry in the coming years. It’s time to stop the self-destruction.
The slogan? “Invest in the U.S.” By that I mean we should stop squandering the nation’s wealth on unnecessary warfare overseas and mindless consumption here at home and start making sensible investments in the well-being of the American people and the long-term health of the economy.
The mind-boggling stupidity that we’ve indulged in was hammered home by a comment almost casually delivered by, of all people, Bernie Madoff, the mild-mannered creator of what appears to have been a nuclear-powered Ponzi scheme. Madoff summed up his activities with devastating simplicity. He is said to have told the F.B.I. that he “paid investors with money that wasn’t there.”
Somehow, over the past few decades, that has become the American way: to pay for things — from wars to Wall Street bonuses to flat-screen TVs to video games — with money that wasn’t there.
Something for nothing became the order of the day. You want to invade Iraq? Convince yourself that oil revenues out of Baghdad will pay for it. (Meanwhile, carve out another deficit channel in the federal budget.) You want to pump up profits in the financial sector? End the oversight and let the lunatics in the asylum run wild.
For those who wanted a bigger house in a nicer neighborhood, there were mortgages with absurdly easy terms. Credit-card offers came in the mail like confetti, and we used them like there was no tomorrow. For students stunned by the skyrocketing cost of tuition, there were college loans that could last a lifetime.
Money that wasn’t there.
Plenty of people managed their credit wisely. But much of the country, including many of the top government officials and financial titans who were supposed to be guarding the nation’s wealth, acted as if there would never be a day of reckoning, a day when — inevitably — the soaring markets would crash and the bubbles explode.
We were stupid in so many ways. We shipped American jobs overseas by the millions and came up with the fiction that this was a good deal for just about everybody. We could have and should have taken the time and made the effort to think globalization through, to be smarter about it and craft ways to cushion its more harmful effects and to share its benefits more equitably.
We bought into the dopey idea that you could radically cut taxes and still maintain critical government services — and fight two wars to boot!
We were living in a dream world. The general public, and to a great extent the press, closed its eyes to the increasingly complex and baffling machinations of the financial industry, which kept screaming that oversight would ruin everything.
We should have known better. It didn’t require a genius (or even an economics degree) to understand a crucial point that popped up some years ago in a front-page article in The Wall Street Journal: “Markets are a great way to organize economic activity, but they need adult supervision.”
Did Alan Greenspan not understand that? Bob Rubin? Larry Summers?
Now that the reality of a stunning economic downturn has so roughly intervened, we at least have the option of being smarter going forward. There is broad agreement that we have no choice but to go much more deeply into debt to jump-start the economy. But we have tremendous choices as to how we use that debt.
We should use it to invest in the U.S. — in a world-class infrastructure (in its broadest sense) to serve as the platform for a world-class, 21st-century economy, and in a system of education that actually prepares American youngsters to deal successfully with the real world they will be encountering.
We need to invest in a health care system that improves the quality of American lives, enhances productivity, puts large numbers of additional people to work and eases the competitive burden of U.S. corporations.
We need to care for our environment (if long-term survival means anything to us) and get serious about weaning ourselves from foreign oil.
And, finally, we need to start living within our means and get past the nauseating idea that the essence of our culture and the be-all and end-all of the American economy is the limitless consumption of trashy consumer goods.
It’s time to stop being stupid.
The moral case against dumb government intervention
By Mark Milke, Calgary HeraldJanuary 9, 2009
On a recent trip to Casablanca to visit relatives, I waited in my brother's car one morning while he dashed into the bank. It was then I noticed a young woman with a small child on the street, begging. It's not an uncommon sight in Morocco, or in Canada, but unlike Canada, where it's often able-bodied young males with their full wits, those seeking a handout in Morocco were either elderly women or young mothers who quite properly trigger sympathy.
The mother was approached by a doctor in the clinic across from where she sat. At this point, I hadn't yet figured out whether she was begging. She was not unkempt and I initially thought she might be waiting for someone; when the physician appeared, I guessed it might be her husband. The impression was reinforced by his air of familiarity with her child.
It soon become obvious that the doctor's interaction with the infant and mother was just that of a kind physician informally inquiring as to their well-being; he'd obviously had some regular interaction with them before, thus, the familiarity. So I got out of the car and gave her some money; she shyly said thank you in Arabic.
But I walked away angry. Not just because of the helplessness one feels when confronted by abject poverty even when one lamely tries to make a difference in isolated cases, but because I am also aware of how governments around the world spend a plethora of public money on dumb intervention instead of smart intervention.
The list is long, but as of late, dumb intervention includes massive bailouts for automakers--$ 4 billion in Canada and $17 billion in the United States with similarly huge sums proposed in Europe--that do nothing to improve the lives of citizens but merely pick favourites in a recession at a cost to everyone else.
There is an economic case to be made against such folly. For example, corporate welfare doesn't create new jobs or save old ones; it only redistributes them at a tremendous cost to others. Save General Motors from bankruptcy and layoffs will take place at Ford or Toyota because the bailout itself won't create any additional demand for new cars. But there is also a moral case to be made against such intervention: it diverts scarce resources--which too often becomes "public" resources, away from justifiable intervention.
Spend billions on the automotive sector to play such public shell games and, on the domestic level, that's fiscal room that can't be used in a neutral manner to reduce the taxes for all businesses and thus help all companies and their employees survive the recession.
Internationally, those same billions cannot now be used to provide clean water or to fight malaria in Africa for nations that can't afford such costs. It can't be used for our troops in Afghanistan to provide security for those who don't wish to be ruled by radicals. It can't be used for any number of needs that number in the millions. If politicians cannot decide which priority is truly most pressing, they should at least leave such billions in our pockets so Canadians can make their own choices about which causes and people to help.
This is not a mere academic debate over fiscal priorities. When developed countries such as Canada and the U. S. or jurisdictions like the European Union engage in corporate welfare, they make it more difficult for poorer nations to compete, to create wealth and to provide for the poorest of their own poor. (The OECD estimates the amount of business subsidies annually to be at least $300 billion US worldwide.) Insofar as poor countries then respond to subsidies doled out by rich nations and divert scarce public resources, there are real, literal consequences at the street level.
A distinction needs to be made between smart government intervention and dumb government intervention.
The problem with the dumb variety is not just that it is unfair-- which it is; the problem is not just that it is economically inefficient--which it is; it is not just that dumb intervention is to the benefit of the politically connected and at a cost to those without such links; it is not just that such arrant intervention is political puffery and preening; the critical indictment of dumb government intervention--that which snatches away limited resources from justifiable public or private priorities --is that it is fundamentally immoral.
Mark Milke is the research Director for the frontier centre, fcpp.org. He also writes a Sunday column for the Herald's editorial page.
© Copyright (c) The Calgary Herald
*****
January 9, 2009
Op-Ed Columnist
The Confidence Surplus
By DAVID BROOKS
Christina Romer is Barack Obama’s choice to lead his Council of Economic Advisers. In 1994, Romer and her husband, David, wrote an essay entitled “What Ends Recessions?” In the first paragraph, the Romers noted that “economists seem strangely unsure about what to tell policy makers to do to end recessions.”
The Romers surveyed the recessions of the previous 50 years to try to reach some conclusions about what works. “Our central conclusion is that monetary policy alone is a sufficiently powerful and flexible tool to end recessions,” they wrote. Automatic spending policies like unemployment insurance have sometimes helped. Discretionary policies, like tax cuts and stimulus plans, have not been of much use. As they put it: “Discretionary fiscal policy, in contrast, does not appear to have had an important role in generating recoveries.”
The Romers briefly described how different administrations responded to recessions. All the administrations, Democratic and Republican, resisted large-scale fiscal stimulus plans. They didn’t believe they could time a stimulus correctly. They didn’t trust Congress to pass the bills quickly or cleanly. They decided they shouldn’t be making policy in what Kennedy administration economists called “an atmosphere of haste and panic brought on by recession.”
The Romers’ essay exemplifies the economic doctrine that reigned up until a few months ago: fiscal stimulus plans that try to time a recession are dangerous, unproven and unnecessary.
That doctrine has suddenly vanished. But not because we suddenly know how to create effective stimulus plans. Last year, the Congress passed a $165 billion plan that seems to have done almost nothing for the economy. The doctrine has vanished because this recession is deeper than the others and we’ve run out of other stuff to do.
Today there is wide support for fiscal stimulus. It’s just that there is no historical experience to tell us how to do it, and there is no agreement on how to make it work. The economists’ prescriptions are all over the map.
Obama is compelled to jump into uncharted territory, with no compass or guide. He could have chosen to spend the big money that is apparently required in cautious ways. He could have chosen to pick out a few easily implemented policies that could be enacted in a way that is targeted, temporary and timely. He could have chosen to merely cut the payroll tax, boost aid to the states and do infrastructure projects.
But the Obama presidency is going to be defined by his audacious self-confidence. In Thursday’s speech, he vowed to do everything at once. He vowed to throw the big things into the stimulus soup — tax cuts, state aid, road and bridge repair — but also the rest of the pantry. He proposes broadband projects, special education programs, a new power grid, new scientific research, teacher training projects and new libraries.
This will be the most complex piece of legislation in American history, and as if the policy content wasn’t complicated enough, Obama also promised to pass it via Immaculate Conception — through a new legislative process that will transform politics. The process, he said, will be totally transparent. There will be no earmarks, no special-interest pleading. In a direct rebuttal to Federalist No. 10, he called on lawmakers to put aside their parochial concerns and pass the measure in weeks.
And as if that isn’t enough, he promised next month to make repairing Social Security and Medicare a “central part” of his budget. “I’m not out to increase the size of government long-term,” he told John Harwood of The Times.
This is daring and impressive stuff. Obama’s team has clearly thought through every piece of this plan. There’s no plank that’s obviously wasteful or that reeks of special-interest pleading. The tax cut is big and bipartisan. Obama is properly worried about runaway deficits, but he’s spending money on things one would want to do anyway. This is not an attempt to use the crisis to build a European-style welfare state.
The problem is overload. Four months ago, no one knew how to put together a stimulus package. Now Obama wants to use it to rush through instant special-ed programs and pre-Ks. Repairing the power grid means clearing complex regulatory hurdles. How is he going to do that in time to employ workers in May?
His staff will be searching for the White House restrooms, and they will have to make billion-dollar decisions by the hour. He is asking Congress to behave and submit in a way it never has. He has picked policies that are phenomenally hard to implement, let alone in weeks. The conventional advice for presidents is: focus your energies on a few big things. Obama just blew the doors off that one.
Maybe Obama can pull this off, but I have my worries. By this time next year, he’ll either be a great president or a broken one.
By Mark Milke, Calgary HeraldJanuary 9, 2009
On a recent trip to Casablanca to visit relatives, I waited in my brother's car one morning while he dashed into the bank. It was then I noticed a young woman with a small child on the street, begging. It's not an uncommon sight in Morocco, or in Canada, but unlike Canada, where it's often able-bodied young males with their full wits, those seeking a handout in Morocco were either elderly women or young mothers who quite properly trigger sympathy.
The mother was approached by a doctor in the clinic across from where she sat. At this point, I hadn't yet figured out whether she was begging. She was not unkempt and I initially thought she might be waiting for someone; when the physician appeared, I guessed it might be her husband. The impression was reinforced by his air of familiarity with her child.
It soon become obvious that the doctor's interaction with the infant and mother was just that of a kind physician informally inquiring as to their well-being; he'd obviously had some regular interaction with them before, thus, the familiarity. So I got out of the car and gave her some money; she shyly said thank you in Arabic.
But I walked away angry. Not just because of the helplessness one feels when confronted by abject poverty even when one lamely tries to make a difference in isolated cases, but because I am also aware of how governments around the world spend a plethora of public money on dumb intervention instead of smart intervention.
The list is long, but as of late, dumb intervention includes massive bailouts for automakers--$ 4 billion in Canada and $17 billion in the United States with similarly huge sums proposed in Europe--that do nothing to improve the lives of citizens but merely pick favourites in a recession at a cost to everyone else.
There is an economic case to be made against such folly. For example, corporate welfare doesn't create new jobs or save old ones; it only redistributes them at a tremendous cost to others. Save General Motors from bankruptcy and layoffs will take place at Ford or Toyota because the bailout itself won't create any additional demand for new cars. But there is also a moral case to be made against such intervention: it diverts scarce resources--which too often becomes "public" resources, away from justifiable intervention.
Spend billions on the automotive sector to play such public shell games and, on the domestic level, that's fiscal room that can't be used in a neutral manner to reduce the taxes for all businesses and thus help all companies and their employees survive the recession.
Internationally, those same billions cannot now be used to provide clean water or to fight malaria in Africa for nations that can't afford such costs. It can't be used for our troops in Afghanistan to provide security for those who don't wish to be ruled by radicals. It can't be used for any number of needs that number in the millions. If politicians cannot decide which priority is truly most pressing, they should at least leave such billions in our pockets so Canadians can make their own choices about which causes and people to help.
This is not a mere academic debate over fiscal priorities. When developed countries such as Canada and the U. S. or jurisdictions like the European Union engage in corporate welfare, they make it more difficult for poorer nations to compete, to create wealth and to provide for the poorest of their own poor. (The OECD estimates the amount of business subsidies annually to be at least $300 billion US worldwide.) Insofar as poor countries then respond to subsidies doled out by rich nations and divert scarce public resources, there are real, literal consequences at the street level.
A distinction needs to be made between smart government intervention and dumb government intervention.
The problem with the dumb variety is not just that it is unfair-- which it is; the problem is not just that it is economically inefficient--which it is; it is not just that dumb intervention is to the benefit of the politically connected and at a cost to those without such links; it is not just that such arrant intervention is political puffery and preening; the critical indictment of dumb government intervention--that which snatches away limited resources from justifiable public or private priorities --is that it is fundamentally immoral.
Mark Milke is the research Director for the frontier centre, fcpp.org. He also writes a Sunday column for the Herald's editorial page.
© Copyright (c) The Calgary Herald
*****
January 9, 2009
Op-Ed Columnist
The Confidence Surplus
By DAVID BROOKS
Christina Romer is Barack Obama’s choice to lead his Council of Economic Advisers. In 1994, Romer and her husband, David, wrote an essay entitled “What Ends Recessions?” In the first paragraph, the Romers noted that “economists seem strangely unsure about what to tell policy makers to do to end recessions.”
The Romers surveyed the recessions of the previous 50 years to try to reach some conclusions about what works. “Our central conclusion is that monetary policy alone is a sufficiently powerful and flexible tool to end recessions,” they wrote. Automatic spending policies like unemployment insurance have sometimes helped. Discretionary policies, like tax cuts and stimulus plans, have not been of much use. As they put it: “Discretionary fiscal policy, in contrast, does not appear to have had an important role in generating recoveries.”
The Romers briefly described how different administrations responded to recessions. All the administrations, Democratic and Republican, resisted large-scale fiscal stimulus plans. They didn’t believe they could time a stimulus correctly. They didn’t trust Congress to pass the bills quickly or cleanly. They decided they shouldn’t be making policy in what Kennedy administration economists called “an atmosphere of haste and panic brought on by recession.”
The Romers’ essay exemplifies the economic doctrine that reigned up until a few months ago: fiscal stimulus plans that try to time a recession are dangerous, unproven and unnecessary.
That doctrine has suddenly vanished. But not because we suddenly know how to create effective stimulus plans. Last year, the Congress passed a $165 billion plan that seems to have done almost nothing for the economy. The doctrine has vanished because this recession is deeper than the others and we’ve run out of other stuff to do.
Today there is wide support for fiscal stimulus. It’s just that there is no historical experience to tell us how to do it, and there is no agreement on how to make it work. The economists’ prescriptions are all over the map.
Obama is compelled to jump into uncharted territory, with no compass or guide. He could have chosen to spend the big money that is apparently required in cautious ways. He could have chosen to pick out a few easily implemented policies that could be enacted in a way that is targeted, temporary and timely. He could have chosen to merely cut the payroll tax, boost aid to the states and do infrastructure projects.
But the Obama presidency is going to be defined by his audacious self-confidence. In Thursday’s speech, he vowed to do everything at once. He vowed to throw the big things into the stimulus soup — tax cuts, state aid, road and bridge repair — but also the rest of the pantry. He proposes broadband projects, special education programs, a new power grid, new scientific research, teacher training projects and new libraries.
This will be the most complex piece of legislation in American history, and as if the policy content wasn’t complicated enough, Obama also promised to pass it via Immaculate Conception — through a new legislative process that will transform politics. The process, he said, will be totally transparent. There will be no earmarks, no special-interest pleading. In a direct rebuttal to Federalist No. 10, he called on lawmakers to put aside their parochial concerns and pass the measure in weeks.
And as if that isn’t enough, he promised next month to make repairing Social Security and Medicare a “central part” of his budget. “I’m not out to increase the size of government long-term,” he told John Harwood of The Times.
This is daring and impressive stuff. Obama’s team has clearly thought through every piece of this plan. There’s no plank that’s obviously wasteful or that reeks of special-interest pleading. The tax cut is big and bipartisan. Obama is properly worried about runaway deficits, but he’s spending money on things one would want to do anyway. This is not an attempt to use the crisis to build a European-style welfare state.
The problem is overload. Four months ago, no one knew how to put together a stimulus package. Now Obama wants to use it to rush through instant special-ed programs and pre-Ks. Repairing the power grid means clearing complex regulatory hurdles. How is he going to do that in time to employ workers in May?
His staff will be searching for the White House restrooms, and they will have to make billion-dollar decisions by the hour. He is asking Congress to behave and submit in a way it never has. He has picked policies that are phenomenally hard to implement, let alone in weeks. The conventional advice for presidents is: focus your energies on a few big things. Obama just blew the doors off that one.
Maybe Obama can pull this off, but I have my worries. By this time next year, he’ll either be a great president or a broken one.
January 11, 2009
Op-Ed Columnist
Tax Cuts for Teachers
By THOMAS L. FRIEDMAN
Over the next couple of years, two very big countries, America and China, will give birth to something very important. They’re each going to give birth to close to $1 trillion worth of economic stimulus — in the form of tax cuts, infrastructure, highways, mass transit and new energy systems. But a lot is riding on these two babies. If China and America each give birth to a pig — a big, energy-devouring, climate-spoiling stimulus hog — our kids are done for. It will be the burden of their lifetimes. If they each give birth to a gazelle — a lean, energy-efficient and innovation-friendly stimulus — it will be the opportunity of their lifetimes.
So here’s hoping that our new administration and Congress will be guided in shaping the stimulus by reading John Maynard Keynes in one hand — to get as much money injected as quickly as possible — and by reading “Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future” with the other.
“Gathering Storm” was the outstanding 2005 report produced by our National Academies on how to keep America competitive by vastly improving math and science education, investing in long-term research, recruiting top students from abroad and making U.S. laws the most conducive in the world for innovation.
You see, even before the current financial crisis, we were already in a deep competitive hole — a long period in which too many people were making money from money, or money from flipping houses or hamburgers, and too few people were making money by making new stuff, with hard-earned science, math, biology and engineering skills.
The financial crisis just made the hole deeper, which is why our stimulus needs to be both big and smart, both financially and educationally stimulating. It needs to be able to produce not only more shovel-ready jobs and shovel-ready workers, but more Google-ready jobs and Windows-ready and knowledge-ready workers.
If we spend $1 trillion on a stimulus and just get better highways and bridges — and not a new Google, Apple, Intel or Microsoft — your kids will thank you for making it so much easier for them to commute to the unemployment office or mediocre jobs.
Barack Obama gets it, but I’m not sure Congress does. “Yes,” Mr. Obama said on Thursday, “we’ll put people to work repairing crumbling roads, bridges and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects. But we’ll also do more to retrofit America for a global economy.” Sure that means more smart grids and broadband highways, he added, but it also “means investing in the science, research and technology that will lead to new medical breakthroughs, new discoveries and entire new industries.”
But clean-tech projects like intelligent grids and broadband take a long time to implement. Can we stimulate both our economy and our people in time? Maybe rather than just giving everyone a quick $1,500 to hit the mall to buy flat-screen TVs imported from China, or creating those all-important green-collar jobs for low-skilled workers — to put people to work installing solar panels and insulating homes — we should also give everyone who is academically eligible and willing a quick $5,000 to go back to school. Universities today are the biggest employers in many Congressional districts, and they’re all having to downsize.
My wife teaches public school in Montgomery County, Md., where more and more teachers can’t afford to buy homes near the schools where they teach, and now have long, dirty commutes from distant suburbs. One of the smartest stimulus moves we could make would be to eliminate federal income taxes on all public schoolteachers so more talented people would choose these careers. I’d also double the salaries of all highly qualified math and science teachers, staple green cards to the diplomas of foreign students who graduate from any U.S. university in math or science — instead of subsidizing their educations and then sending them home — and offer full scholarships to needy students who want to go to a public university or community college for the next four years.
J.F.K. took us to the moon. Let B.H.O. take America back to school.
But that will take time. There’s simply no shortcut for a stimulus that stimulates minds not just salaries. “You can bail out a bank; you can’t bail out a generation,” says the great American inventor, Dean Kamen, who has designed everything from the Segway to artificial limbs. “You can print money, but you can’t print knowledge. It takes 12 years.”
Sure, we’ll waste some money doing that. That will happen with bridges, too. But a bridge is just a bridge. Once it’s up, it stops stimulating. A student who normally would not be interested in science but gets stimulated by a better teacher or more exposure to a lab, or a scientist who gets the funding for new research, is potentially the next Steve Jobs or Bill Gates. They create good jobs for years. Perhaps more bridges can bail us out of a depression, but only more Bills and Steves can bail us into prosperity.
Op-Ed Columnist
Tax Cuts for Teachers
By THOMAS L. FRIEDMAN
Over the next couple of years, two very big countries, America and China, will give birth to something very important. They’re each going to give birth to close to $1 trillion worth of economic stimulus — in the form of tax cuts, infrastructure, highways, mass transit and new energy systems. But a lot is riding on these two babies. If China and America each give birth to a pig — a big, energy-devouring, climate-spoiling stimulus hog — our kids are done for. It will be the burden of their lifetimes. If they each give birth to a gazelle — a lean, energy-efficient and innovation-friendly stimulus — it will be the opportunity of their lifetimes.
So here’s hoping that our new administration and Congress will be guided in shaping the stimulus by reading John Maynard Keynes in one hand — to get as much money injected as quickly as possible — and by reading “Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future” with the other.
“Gathering Storm” was the outstanding 2005 report produced by our National Academies on how to keep America competitive by vastly improving math and science education, investing in long-term research, recruiting top students from abroad and making U.S. laws the most conducive in the world for innovation.
You see, even before the current financial crisis, we were already in a deep competitive hole — a long period in which too many people were making money from money, or money from flipping houses or hamburgers, and too few people were making money by making new stuff, with hard-earned science, math, biology and engineering skills.
The financial crisis just made the hole deeper, which is why our stimulus needs to be both big and smart, both financially and educationally stimulating. It needs to be able to produce not only more shovel-ready jobs and shovel-ready workers, but more Google-ready jobs and Windows-ready and knowledge-ready workers.
If we spend $1 trillion on a stimulus and just get better highways and bridges — and not a new Google, Apple, Intel or Microsoft — your kids will thank you for making it so much easier for them to commute to the unemployment office or mediocre jobs.
Barack Obama gets it, but I’m not sure Congress does. “Yes,” Mr. Obama said on Thursday, “we’ll put people to work repairing crumbling roads, bridges and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects. But we’ll also do more to retrofit America for a global economy.” Sure that means more smart grids and broadband highways, he added, but it also “means investing in the science, research and technology that will lead to new medical breakthroughs, new discoveries and entire new industries.”
But clean-tech projects like intelligent grids and broadband take a long time to implement. Can we stimulate both our economy and our people in time? Maybe rather than just giving everyone a quick $1,500 to hit the mall to buy flat-screen TVs imported from China, or creating those all-important green-collar jobs for low-skilled workers — to put people to work installing solar panels and insulating homes — we should also give everyone who is academically eligible and willing a quick $5,000 to go back to school. Universities today are the biggest employers in many Congressional districts, and they’re all having to downsize.
My wife teaches public school in Montgomery County, Md., where more and more teachers can’t afford to buy homes near the schools where they teach, and now have long, dirty commutes from distant suburbs. One of the smartest stimulus moves we could make would be to eliminate federal income taxes on all public schoolteachers so more talented people would choose these careers. I’d also double the salaries of all highly qualified math and science teachers, staple green cards to the diplomas of foreign students who graduate from any U.S. university in math or science — instead of subsidizing their educations and then sending them home — and offer full scholarships to needy students who want to go to a public university or community college for the next four years.
J.F.K. took us to the moon. Let B.H.O. take America back to school.
But that will take time. There’s simply no shortcut for a stimulus that stimulates minds not just salaries. “You can bail out a bank; you can’t bail out a generation,” says the great American inventor, Dean Kamen, who has designed everything from the Segway to artificial limbs. “You can print money, but you can’t print knowledge. It takes 12 years.”
Sure, we’ll waste some money doing that. That will happen with bridges, too. But a bridge is just a bridge. Once it’s up, it stops stimulating. A student who normally would not be interested in science but gets stimulated by a better teacher or more exposure to a lab, or a scientist who gets the funding for new research, is potentially the next Steve Jobs or Bill Gates. They create good jobs for years. Perhaps more bridges can bail us out of a depression, but only more Bills and Steves can bail us into prosperity.
January 16, 2009
Op-Ed Columnist
An Economy of Faith and Trust
By DAVID BROOKS
Once there was just Newtonian physics and the world seemed neat and mechanical. Then quantum physics came along and revealed that deep down things are much weirder than they seem. Something similar is now happening with public policy.
Once, classical economics dominated policy thinking. The classical models presumed a certain sort of orderly human makeup. Inside each person, reason rides the passions the way a rider sits atop a horse. Sometimes people do stupid things, but generally the rider makes deliberative decisions, and the market rewards rational behavior.
Markets tend toward efficiency. People respond in pretty straightforward ways to incentives. The invisible hand forms a spontaneous, dynamic order. Economic behavior can be accurately predicted through elegant models.
This view explains a lot, but not the current financial crisis — how so many people could be so stupid, incompetent and self-destructive all at once. The crisis has delivered a blow to classical economics and taken a body of psychological work that was at the edge of public policy thought and brought it front and center.
In this new body of thought, you get a very different picture of human nature. Reason is not like a rider atop a horse. Instead, each person’s mind contains a panoply of instincts, strategies, intuitions, emotions, memories and habits, which vie for supremacy. An irregular, idiosyncratic and largely unconscious process determines which of these internal players gets to control behavior at any instant. Context — which stimulus triggers which response — matters a lot.
This mental chaos explains how people can respond so quickly and intuitively to so many different circumstances. But it also entails a decision-making process that is more complicated and messy than previously thought.
For example, we don’t perceive circumstances objectively. We pick out those bits of data that make us feel good because they confirm our prejudices. As Andrew Lo of M.I.T. has demonstrated, if stock traders make a series of apparently good picks, the dopamine released into their brains creates a stupor that causes them to underperceive danger ahead.
Biases abound. People who’ve been told to think of a high number will subsequently bid much more for an item than people who’ve been told to think of a low number. As Jonah Lehrer writes in his forthcoming book, “How We Decide,” there are certain circumstances (often when there are many options) in which gut instincts lead to the best decisions, while there are other circumstances (sometimes when there are a few options) when calm deliberation is best.
Most important, people seek relationships more than money. If behaving a certain way helps a stock trader or a regulator fit in with his crowd, he’s likely to keep doing it without too much rigorous self-examination.
A thousand mental shortcomings contributed to the financial meltdown. Republicans have tried to explain it by pointing to irresponsible policies at Fannie Mae. But that only explains a piece of what’s happening.
This crisis represents a flaw in the classical economic model and its belief in efficient markets. Republicans haven’t begun to grapple with the consequences.
For years, Republicans have been trying to create a large investor class with policies like private Social Security accounts, medical savings accounts and education vouchers. These policies were based on the belief that investors are careful, rational actors who make optimal decisions. There was little allowance made for the frailty of the decision-making process, let alone the mass delusions that led to the current crack-up.
Democrats also have an unfaced crisis. Democratic discussions of the stimulus package also rest on a mechanical, dehumanized view of the economy. You pump in a certain amount of money and “the economy” spits out a certain number of jobs. Democratic economists issue highly specific accounts of multiplier effects — whether a dollar of spending creates $1.20 or $1.40 of economic activity.
But an economy is a society of trust and faith. A recession is a mental event, and every recession has its own unique spirit. This recession was caused by deep imbalances and is propelled by a cascade of fundamental insecurities. You can pump hundreds of billions into the banks, but insecure bankers still won’t lend. You can run up gigantic deficits, hire road builders and reduce the unemployment rate from 8 percent to 7 percent, but insecure people will still not spend and invest.
The economic spirit of a people cannot be manipulated in as simple-minded a fashion as the Keynesian mechanists imagine. Right now political and economic confidence levels are running in opposite directions. Politically, we’re in a season of optimism, but despite a trillion spent and a trillion more about to be, the economic spirit cowers.
Mechanistic thinkers on the right and left pose as rigorous empiricists. But empiricism built on an inaccurate view of human nature is just a prison.
*****
January 16, 2009
Op-Ed Columnist
Forgive and Forget?
By PAUL KRUGMAN
Last Sunday President-elect Barack Obama was asked whether he would seek an investigation of possible crimes by the Bush administration. “I don’t believe that anybody is above the law,” he responded, but “we need to look forward as opposed to looking backwards.”
I’m sorry, but if we don’t have an inquest into what happened during the Bush years — and nearly everyone has taken Mr. Obama’s remarks to mean that we won’t — this means that those who hold power are indeed above the law because they don’t face any consequences if they abuse their power.
Let’s be clear what we’re talking about here. It’s not just torture and illegal wiretapping, whose perpetrators claim, however implausibly, that they were patriots acting to defend the nation’s security. The fact is that the Bush administration’s abuses extended from environmental policy to voting rights. And most of the abuses involved using the power of government to reward political friends and punish political enemies.
At the Justice Department, for example, political appointees illegally reserved nonpolitical positions for “right-thinking Americans” — their term, not mine — and there’s strong evidence that officials used their positions both to undermine the protection of minority voting rights and to persecute Democratic politicians.
The hiring process at Justice echoed the hiring process during the occupation of Iraq — an occupation whose success was supposedly essential to national security — in which applicants were judged by their politics, their personal loyalty to President Bush and, according to some reports, by their views on Roe v. Wade, rather than by their ability to do the job.
Speaking of Iraq, let’s also not forget that country’s failed reconstruction: the Bush administration handed billions of dollars in no-bid contracts to politically connected companies, companies that then failed to deliver. And why should they have bothered to do their jobs? Any government official who tried to enforce accountability on, say, Halliburton quickly found his or her career derailed.
There’s much, much more. By my count, at least six important government agencies experienced major scandals over the past eight years — in most cases, scandals that were never properly investigated. And then there was the biggest scandal of all: Does anyone seriously doubt that the Bush administration deliberately misled the nation into invading Iraq?
Why, then, shouldn’t we have an official inquiry into abuses during the Bush years?
One answer you hear is that pursuing the truth would be divisive, that it would exacerbate partisanship. But if partisanship is so terrible, shouldn’t there be some penalty for the Bush administration’s politicization of every aspect of government?
Alternatively, we’re told that we don’t have to dwell on past abuses, because we won’t repeat them. But no important figure in the Bush administration, or among that administration’s political allies, has expressed remorse for breaking the law. What makes anyone think that they or their political heirs won’t do it all over again, given the chance?
In fact, we’ve already seen this movie. During the Reagan years, the Iran-contra conspirators violated the Constitution in the name of national security. But the first President Bush pardoned the major malefactors, and when the White House finally changed hands the political and media establishment gave Bill Clinton the same advice it’s giving Mr. Obama: let sleeping scandals lie. Sure enough, the second Bush administration picked up right where the Iran-contra conspirators left off — which isn’t too surprising when you bear in mind that Mr. Bush actually hired some of those conspirators.
Now, it’s true that a serious investigation of Bush-era abuses would make Washington an uncomfortable place, both for those who abused power and those who acted as their enablers or apologists. And these people have a lot of friends. But the price of protecting their comfort would be high: If we whitewash the abuses of the past eight years, we’ll guarantee that they will happen again.
Meanwhile, about Mr. Obama: while it’s probably in his short-term political interests to forgive and forget, next week he’s going to swear to “preserve, protect, and defend the Constitution of the United States.” That’s not a conditional oath to be honored only when it’s convenient.
And to protect and defend the Constitution, a president must do more than obey the Constitution himself; he must hold those who violate the Constitution accountable. So Mr. Obama should reconsider his apparent decision to let the previous administration get away with crime. Consequences aside, that’s not a decision he has the right to make.
Op-Ed Columnist
An Economy of Faith and Trust
By DAVID BROOKS
Once there was just Newtonian physics and the world seemed neat and mechanical. Then quantum physics came along and revealed that deep down things are much weirder than they seem. Something similar is now happening with public policy.
Once, classical economics dominated policy thinking. The classical models presumed a certain sort of orderly human makeup. Inside each person, reason rides the passions the way a rider sits atop a horse. Sometimes people do stupid things, but generally the rider makes deliberative decisions, and the market rewards rational behavior.
Markets tend toward efficiency. People respond in pretty straightforward ways to incentives. The invisible hand forms a spontaneous, dynamic order. Economic behavior can be accurately predicted through elegant models.
This view explains a lot, but not the current financial crisis — how so many people could be so stupid, incompetent and self-destructive all at once. The crisis has delivered a blow to classical economics and taken a body of psychological work that was at the edge of public policy thought and brought it front and center.
In this new body of thought, you get a very different picture of human nature. Reason is not like a rider atop a horse. Instead, each person’s mind contains a panoply of instincts, strategies, intuitions, emotions, memories and habits, which vie for supremacy. An irregular, idiosyncratic and largely unconscious process determines which of these internal players gets to control behavior at any instant. Context — which stimulus triggers which response — matters a lot.
This mental chaos explains how people can respond so quickly and intuitively to so many different circumstances. But it also entails a decision-making process that is more complicated and messy than previously thought.
For example, we don’t perceive circumstances objectively. We pick out those bits of data that make us feel good because they confirm our prejudices. As Andrew Lo of M.I.T. has demonstrated, if stock traders make a series of apparently good picks, the dopamine released into their brains creates a stupor that causes them to underperceive danger ahead.
Biases abound. People who’ve been told to think of a high number will subsequently bid much more for an item than people who’ve been told to think of a low number. As Jonah Lehrer writes in his forthcoming book, “How We Decide,” there are certain circumstances (often when there are many options) in which gut instincts lead to the best decisions, while there are other circumstances (sometimes when there are a few options) when calm deliberation is best.
Most important, people seek relationships more than money. If behaving a certain way helps a stock trader or a regulator fit in with his crowd, he’s likely to keep doing it without too much rigorous self-examination.
A thousand mental shortcomings contributed to the financial meltdown. Republicans have tried to explain it by pointing to irresponsible policies at Fannie Mae. But that only explains a piece of what’s happening.
This crisis represents a flaw in the classical economic model and its belief in efficient markets. Republicans haven’t begun to grapple with the consequences.
For years, Republicans have been trying to create a large investor class with policies like private Social Security accounts, medical savings accounts and education vouchers. These policies were based on the belief that investors are careful, rational actors who make optimal decisions. There was little allowance made for the frailty of the decision-making process, let alone the mass delusions that led to the current crack-up.
Democrats also have an unfaced crisis. Democratic discussions of the stimulus package also rest on a mechanical, dehumanized view of the economy. You pump in a certain amount of money and “the economy” spits out a certain number of jobs. Democratic economists issue highly specific accounts of multiplier effects — whether a dollar of spending creates $1.20 or $1.40 of economic activity.
But an economy is a society of trust and faith. A recession is a mental event, and every recession has its own unique spirit. This recession was caused by deep imbalances and is propelled by a cascade of fundamental insecurities. You can pump hundreds of billions into the banks, but insecure bankers still won’t lend. You can run up gigantic deficits, hire road builders and reduce the unemployment rate from 8 percent to 7 percent, but insecure people will still not spend and invest.
The economic spirit of a people cannot be manipulated in as simple-minded a fashion as the Keynesian mechanists imagine. Right now political and economic confidence levels are running in opposite directions. Politically, we’re in a season of optimism, but despite a trillion spent and a trillion more about to be, the economic spirit cowers.
Mechanistic thinkers on the right and left pose as rigorous empiricists. But empiricism built on an inaccurate view of human nature is just a prison.
*****
January 16, 2009
Op-Ed Columnist
Forgive and Forget?
By PAUL KRUGMAN
Last Sunday President-elect Barack Obama was asked whether he would seek an investigation of possible crimes by the Bush administration. “I don’t believe that anybody is above the law,” he responded, but “we need to look forward as opposed to looking backwards.”
I’m sorry, but if we don’t have an inquest into what happened during the Bush years — and nearly everyone has taken Mr. Obama’s remarks to mean that we won’t — this means that those who hold power are indeed above the law because they don’t face any consequences if they abuse their power.
Let’s be clear what we’re talking about here. It’s not just torture and illegal wiretapping, whose perpetrators claim, however implausibly, that they were patriots acting to defend the nation’s security. The fact is that the Bush administration’s abuses extended from environmental policy to voting rights. And most of the abuses involved using the power of government to reward political friends and punish political enemies.
At the Justice Department, for example, political appointees illegally reserved nonpolitical positions for “right-thinking Americans” — their term, not mine — and there’s strong evidence that officials used their positions both to undermine the protection of minority voting rights and to persecute Democratic politicians.
The hiring process at Justice echoed the hiring process during the occupation of Iraq — an occupation whose success was supposedly essential to national security — in which applicants were judged by their politics, their personal loyalty to President Bush and, according to some reports, by their views on Roe v. Wade, rather than by their ability to do the job.
Speaking of Iraq, let’s also not forget that country’s failed reconstruction: the Bush administration handed billions of dollars in no-bid contracts to politically connected companies, companies that then failed to deliver. And why should they have bothered to do their jobs? Any government official who tried to enforce accountability on, say, Halliburton quickly found his or her career derailed.
There’s much, much more. By my count, at least six important government agencies experienced major scandals over the past eight years — in most cases, scandals that were never properly investigated. And then there was the biggest scandal of all: Does anyone seriously doubt that the Bush administration deliberately misled the nation into invading Iraq?
Why, then, shouldn’t we have an official inquiry into abuses during the Bush years?
One answer you hear is that pursuing the truth would be divisive, that it would exacerbate partisanship. But if partisanship is so terrible, shouldn’t there be some penalty for the Bush administration’s politicization of every aspect of government?
Alternatively, we’re told that we don’t have to dwell on past abuses, because we won’t repeat them. But no important figure in the Bush administration, or among that administration’s political allies, has expressed remorse for breaking the law. What makes anyone think that they or their political heirs won’t do it all over again, given the chance?
In fact, we’ve already seen this movie. During the Reagan years, the Iran-contra conspirators violated the Constitution in the name of national security. But the first President Bush pardoned the major malefactors, and when the White House finally changed hands the political and media establishment gave Bill Clinton the same advice it’s giving Mr. Obama: let sleeping scandals lie. Sure enough, the second Bush administration picked up right where the Iran-contra conspirators left off — which isn’t too surprising when you bear in mind that Mr. Bush actually hired some of those conspirators.
Now, it’s true that a serious investigation of Bush-era abuses would make Washington an uncomfortable place, both for those who abused power and those who acted as their enablers or apologists. And these people have a lot of friends. But the price of protecting their comfort would be high: If we whitewash the abuses of the past eight years, we’ll guarantee that they will happen again.
Meanwhile, about Mr. Obama: while it’s probably in his short-term political interests to forgive and forget, next week he’s going to swear to “preserve, protect, and defend the Constitution of the United States.” That’s not a conditional oath to be honored only when it’s convenient.
And to protect and defend the Constitution, a president must do more than obey the Constitution himself; he must hold those who violate the Constitution accountable. So Mr. Obama should reconsider his apparent decision to let the previous administration get away with crime. Consequences aside, that’s not a decision he has the right to make.
There is also a related multimedia and links to other related items at:
http://www.nytimes.com/2009/01/18/weeki ... tacle.html
January 18, 2009
Viewers' Guide to the Inauguration
The Crowds Have Grown Bigger, the Hats Shorter
By JIM RUTENBERG
There is certainly no denying the singular historical importance of the swearing-in of the nation’s first black president.
But the many superlatives attached to the inauguration of Barack Obama on Tuesday also happen to make it like so many inaugurations that have come before it, each with its own set of “firsts,” “mosts” and “unprecedenteds.”
Mr. Obama will break new technological ground by being the first to use text-messaging and YouTube as part his festivities. James Polk plowed a path in 1845 by holding the first inaugural to be covered by telegraph, while James Buchanan’s inaugural in 1857 was the first known to be photographed. Calvin Coolidge’s inaugural in 1925 was the first covered nationally by radio, and Harry S. Truman’s inaugural in 1949 was the first to be televised nationally.
(John Adams was the first president to wear long trousers during a swearing-in, according to a list of inauguration trivia kept by the office of the architect of the Capitol. Apropos of nothing, this irresistible factoid certainly deserves its place in these parentheses.)
Mr. Obama will set new standards in inaugural protection, with some 20,000 officers requiring potentially millions to pass through metal detectors as they enter the largest security zone established for an inauguration. Lyndon Johnson in 1965 was the first to use a fortified, bullet-proof limousine and the 1997 inauguration of Bill Clinton was the first to have protection from a Marine Corps unit specializing in chemical and biological weapons.
But an examination of inaugural-week customs provides more than a sharp lens capturing the country’s striking political, technological and sociological shifts. It also offers, over the course of 43 presidencies, a refresher in those constants that have been stubbornly immune to the changing times.
“It’s a sign of constitutional stability and endurance that I find actually quite reassuring,” the presidential historian David M. Kennedy said of the inaugural tradition. “If you mapped out the extreme regularity of the cycle of elections and inaugurations and swearing-in ceremonies against the very mercurial changes in the economy and technology and world affairs, I think it’s actually quite comforting.”
Perhaps no previous presidency has been referred to more since Mr. Obama’s election than that of Lincoln, and one fears that even Lincoln could “jump the shark” before this inaugural season is over. But reports from his two swearing-in ceremonies in 1861 and 1865 provide a striking mix of similarities and differences when compared with those planned for next week.
Mr. Obama is to take his oath upon the same Bible that Lincoln used. And the president-elect said last week that he had been studying Lincoln’s second Inaugural Address and its stirring call for national unity.
That inauguration came during the Civil War, and dispatches from the day tend to be brief and terse, with The Associated Press reporting the groundbreaking inclusion of African-Americans in the inaugural parade with a single clause: “One feature in the procession is the colored troops and the Odd-Fellows, with their band of music.”
The second inaugural had an in-person audience of 50,000 people, The New York Times reported at the time. Mr. Obama’s inauguration is expected to have an audience of two million to four million people.
Lincoln’s first inaugural, in 1861, was small enough that, according to an account in The Times the following day, “everybody who was entitled to admission got in, and everybody who could not go in could see from without.” On Tuesday, that will only happen with the help of 20 Sony JumboTrons.
Even with the Civil War looming, Lincoln and his predecessor, James Buchanan, headed to the Capitol that day for the swearing-in ceremony in an open-air carriage. Mr. Obama and Mr. Bush will also head to the Capitol together — in the closed and heavily fortified presidential limousine.
Then, as now, the Washington press corps seemed to revel in the search for meaning in every facial tic or expression of its subjects. A reporter for The Times noted that as Buchanan sat and waited for Lincoln to take his oath, he “sighed audibly, and frequently, but whether from reflection upon the failure of his administration, I can’t say.”
Then, as now, the public was transfixed by the glamour of the inaugural ball — though there was only one then as opposed to several now — and the style of dress of those lucky enough to go. “Mrs. Drake Mills is gorgeously attired in two thousand dollars’ worth of laces and twenty thousand dollars’ worth of diamonds,” The Times reported in a lengthy recap of Lincoln’s first inaugural ball.
In an online style blog The Los Angeles Times advised those going to this year’s balls, “Go easy on the cleavage and don’t try to upstage the First Lady.”
Yet, during Lincoln’s inaugurals, women did not get much farther than the balls. Nellie Taft was the first first lady to ride with her husband from the Capitol to the White House, in 1909. Women were first included in the inaugural parade for Woodrow Wilson in 1917.
While Mr. Obama’s status as the first African-American to be president will be the most important “first” of the day, it is not the only first along demographical lines: Linda Douglass, a spokeswoman for the inaugural committee, reported that this will also be the first time that a gay and lesbian band has marched in an inaugural parade.
That is just the way these things work. Inaugurations tend to break ground in several areas. For instance, John F. Kennedy’s inauguration marked not only the first time a Catholic was taking the presidential oath, according to the architect of the Capitol’s office; it was also the last time a president-elect arrived to be sworn in wearing a top hat.
****
January 18, 2009
Op-Ed Columnist
Time for (Self) Shock Therapy
By THOMAS L. FRIEDMAN
I was walking by a TV the other day and CNN was on, airing a hearing of what seemed to be a banking committee in Congress debating whether to release more bailout money. CNN didn’t identify the lawmaker who was speaking. He had a bit of a Southern drawl. But I burst out laughing when he said something like: “I remember a time when banks lent money to people. Now it’s the other way around.”
Yes, kids, those were the days — when banks lent money to the people not the people to the banks!
Many commentators have suggestions for Barack Obama on what should be his first meeting at the White House. Here is mine: Mr. Obama and his economic team should convene the 300 leading bank presidents in the East Room and the president should say to each one of them something like this:
“Ladies and gentlemen, this crisis started with you, the bankers, engaging in reckless practices, and it will only end when we clean up your mess and start afresh. The banking system is the heart of our economy. It pumps blood to our industrial muscles, and right now it’s not pumping. We all know that in the past six months you’ve gone from one extreme to another. You’ve gone from lending money to anyone who could fog up a knife to now treating all potential borrowers, no matter how healthy, as bankrupt until proven innocent. And, therefore, you’re either not lending to them or lending under such onerous terms that the economy can’t get any liftoff. No amount of stimulus will work without a healthy banking system.
“So here’s what we’re going to do: we’re going to unclog the arteries. My banking experts have analyzed each of your balance sheets. You will tell us if we’re right. Those of you who are insolvent, we will nationalize and shut down. We will auction off your viable assets and will hold the toxic ones in a government reconstruction fund and sell them later when the market rebounds. Those of you who are weak will be merged. And those of you who are strong will receive added capital for your balance sheets, after you write down all your remaining toxic waste. I am not going to continue rewarding the losers and dimwits amongst you with handouts.”
Without this sort of come-to-Jesus strategy, we’re going to continue to just limp along. We’ll never quite confront the real problem because we don’t want to take the upfront pain. Therefore, the market will never clear — meaning start-ups in need of capital will be choked in their cribs and profit-making firms won’t be able to grow as they should.
“Right now,” said David Smick, author of “The World Is Curved,” “the bankers are sitting on mountains of cash, including our bailout money, because they know their true balance sheets are a disaster — far worse than publicly stated.” The situation will likely worsen as delinquent consumer and auto loans are piled atop bad mortgages. “Obama needs to inject some truth serum into the banking discussion. No one trusts the banks, and even the bankers don’t trust each other.” Bringing clarity to bank balance sheets, said Smick, “is the first step to fixing America’s bank lending problem.”
Only after we bring full transparency to the bank balance sheets will we see private capital buying into banks again at scale. But have no illusions. There are still real balance sheet problems that have to be surmounted. This is not just a psychological crisis.
“I wish people would stop saying that this is a crisis of confidence,” said Steven Eisman, a portfolio manager and banking expert at FrontPoint Partners. “The loss of confidence is just a symptom of bad credit and over-leverage. The banks are not lending because they know their balance sheets are loaded with future losses and they don’t have enough capital. The TARP gave them preferred equity, which is nothing more than a bridge loan. We need the government to force the banks to write down all their bad assets now and then recapitalize themselves, preferably with private capital. Those banks that cannot raise sufficient capital should be seized and their deposits sold off.”
For too long the government has been taking the banks at their own words, which is one reason we keep getting surprised with demands for more bailout cash. The Treasury needs to be doing its own brutal, burn-down analysis of every major bank’s balance sheet — and then acting accordingly.
In recent years, “whenever other countries — Russia, Thailand, Indonesia, South Korea or Mexico — got themselves into an economic crisis, we lectured them about how they had to adopt ‘shock therapy,’ ” said Moisés Naím, editor of Foreign Policy magazine. “But now that we are the ones in crisis and in need of shock therapy, everyone is preaching gradualism.”
A stimulus package that does not also unclog the arteries of our banking system will never stimulate sufficiently. Mr. Obama should take the pain early, blame it all on George Bush and then reap the benefits down the road. Postpone the pain, postpone the recovery.
http://www.nytimes.com/2009/01/18/weeki ... tacle.html
January 18, 2009
Viewers' Guide to the Inauguration
The Crowds Have Grown Bigger, the Hats Shorter
By JIM RUTENBERG
There is certainly no denying the singular historical importance of the swearing-in of the nation’s first black president.
But the many superlatives attached to the inauguration of Barack Obama on Tuesday also happen to make it like so many inaugurations that have come before it, each with its own set of “firsts,” “mosts” and “unprecedenteds.”
Mr. Obama will break new technological ground by being the first to use text-messaging and YouTube as part his festivities. James Polk plowed a path in 1845 by holding the first inaugural to be covered by telegraph, while James Buchanan’s inaugural in 1857 was the first known to be photographed. Calvin Coolidge’s inaugural in 1925 was the first covered nationally by radio, and Harry S. Truman’s inaugural in 1949 was the first to be televised nationally.
(John Adams was the first president to wear long trousers during a swearing-in, according to a list of inauguration trivia kept by the office of the architect of the Capitol. Apropos of nothing, this irresistible factoid certainly deserves its place in these parentheses.)
Mr. Obama will set new standards in inaugural protection, with some 20,000 officers requiring potentially millions to pass through metal detectors as they enter the largest security zone established for an inauguration. Lyndon Johnson in 1965 was the first to use a fortified, bullet-proof limousine and the 1997 inauguration of Bill Clinton was the first to have protection from a Marine Corps unit specializing in chemical and biological weapons.
But an examination of inaugural-week customs provides more than a sharp lens capturing the country’s striking political, technological and sociological shifts. It also offers, over the course of 43 presidencies, a refresher in those constants that have been stubbornly immune to the changing times.
“It’s a sign of constitutional stability and endurance that I find actually quite reassuring,” the presidential historian David M. Kennedy said of the inaugural tradition. “If you mapped out the extreme regularity of the cycle of elections and inaugurations and swearing-in ceremonies against the very mercurial changes in the economy and technology and world affairs, I think it’s actually quite comforting.”
Perhaps no previous presidency has been referred to more since Mr. Obama’s election than that of Lincoln, and one fears that even Lincoln could “jump the shark” before this inaugural season is over. But reports from his two swearing-in ceremonies in 1861 and 1865 provide a striking mix of similarities and differences when compared with those planned for next week.
Mr. Obama is to take his oath upon the same Bible that Lincoln used. And the president-elect said last week that he had been studying Lincoln’s second Inaugural Address and its stirring call for national unity.
That inauguration came during the Civil War, and dispatches from the day tend to be brief and terse, with The Associated Press reporting the groundbreaking inclusion of African-Americans in the inaugural parade with a single clause: “One feature in the procession is the colored troops and the Odd-Fellows, with their band of music.”
The second inaugural had an in-person audience of 50,000 people, The New York Times reported at the time. Mr. Obama’s inauguration is expected to have an audience of two million to four million people.
Lincoln’s first inaugural, in 1861, was small enough that, according to an account in The Times the following day, “everybody who was entitled to admission got in, and everybody who could not go in could see from without.” On Tuesday, that will only happen with the help of 20 Sony JumboTrons.
Even with the Civil War looming, Lincoln and his predecessor, James Buchanan, headed to the Capitol that day for the swearing-in ceremony in an open-air carriage. Mr. Obama and Mr. Bush will also head to the Capitol together — in the closed and heavily fortified presidential limousine.
Then, as now, the Washington press corps seemed to revel in the search for meaning in every facial tic or expression of its subjects. A reporter for The Times noted that as Buchanan sat and waited for Lincoln to take his oath, he “sighed audibly, and frequently, but whether from reflection upon the failure of his administration, I can’t say.”
Then, as now, the public was transfixed by the glamour of the inaugural ball — though there was only one then as opposed to several now — and the style of dress of those lucky enough to go. “Mrs. Drake Mills is gorgeously attired in two thousand dollars’ worth of laces and twenty thousand dollars’ worth of diamonds,” The Times reported in a lengthy recap of Lincoln’s first inaugural ball.
In an online style blog The Los Angeles Times advised those going to this year’s balls, “Go easy on the cleavage and don’t try to upstage the First Lady.”
Yet, during Lincoln’s inaugurals, women did not get much farther than the balls. Nellie Taft was the first first lady to ride with her husband from the Capitol to the White House, in 1909. Women were first included in the inaugural parade for Woodrow Wilson in 1917.
While Mr. Obama’s status as the first African-American to be president will be the most important “first” of the day, it is not the only first along demographical lines: Linda Douglass, a spokeswoman for the inaugural committee, reported that this will also be the first time that a gay and lesbian band has marched in an inaugural parade.
That is just the way these things work. Inaugurations tend to break ground in several areas. For instance, John F. Kennedy’s inauguration marked not only the first time a Catholic was taking the presidential oath, according to the architect of the Capitol’s office; it was also the last time a president-elect arrived to be sworn in wearing a top hat.
****
January 18, 2009
Op-Ed Columnist
Time for (Self) Shock Therapy
By THOMAS L. FRIEDMAN
I was walking by a TV the other day and CNN was on, airing a hearing of what seemed to be a banking committee in Congress debating whether to release more bailout money. CNN didn’t identify the lawmaker who was speaking. He had a bit of a Southern drawl. But I burst out laughing when he said something like: “I remember a time when banks lent money to people. Now it’s the other way around.”
Yes, kids, those were the days — when banks lent money to the people not the people to the banks!
Many commentators have suggestions for Barack Obama on what should be his first meeting at the White House. Here is mine: Mr. Obama and his economic team should convene the 300 leading bank presidents in the East Room and the president should say to each one of them something like this:
“Ladies and gentlemen, this crisis started with you, the bankers, engaging in reckless practices, and it will only end when we clean up your mess and start afresh. The banking system is the heart of our economy. It pumps blood to our industrial muscles, and right now it’s not pumping. We all know that in the past six months you’ve gone from one extreme to another. You’ve gone from lending money to anyone who could fog up a knife to now treating all potential borrowers, no matter how healthy, as bankrupt until proven innocent. And, therefore, you’re either not lending to them or lending under such onerous terms that the economy can’t get any liftoff. No amount of stimulus will work without a healthy banking system.
“So here’s what we’re going to do: we’re going to unclog the arteries. My banking experts have analyzed each of your balance sheets. You will tell us if we’re right. Those of you who are insolvent, we will nationalize and shut down. We will auction off your viable assets and will hold the toxic ones in a government reconstruction fund and sell them later when the market rebounds. Those of you who are weak will be merged. And those of you who are strong will receive added capital for your balance sheets, after you write down all your remaining toxic waste. I am not going to continue rewarding the losers and dimwits amongst you with handouts.”
Without this sort of come-to-Jesus strategy, we’re going to continue to just limp along. We’ll never quite confront the real problem because we don’t want to take the upfront pain. Therefore, the market will never clear — meaning start-ups in need of capital will be choked in their cribs and profit-making firms won’t be able to grow as they should.
“Right now,” said David Smick, author of “The World Is Curved,” “the bankers are sitting on mountains of cash, including our bailout money, because they know their true balance sheets are a disaster — far worse than publicly stated.” The situation will likely worsen as delinquent consumer and auto loans are piled atop bad mortgages. “Obama needs to inject some truth serum into the banking discussion. No one trusts the banks, and even the bankers don’t trust each other.” Bringing clarity to bank balance sheets, said Smick, “is the first step to fixing America’s bank lending problem.”
Only after we bring full transparency to the bank balance sheets will we see private capital buying into banks again at scale. But have no illusions. There are still real balance sheet problems that have to be surmounted. This is not just a psychological crisis.
“I wish people would stop saying that this is a crisis of confidence,” said Steven Eisman, a portfolio manager and banking expert at FrontPoint Partners. “The loss of confidence is just a symptom of bad credit and over-leverage. The banks are not lending because they know their balance sheets are loaded with future losses and they don’t have enough capital. The TARP gave them preferred equity, which is nothing more than a bridge loan. We need the government to force the banks to write down all their bad assets now and then recapitalize themselves, preferably with private capital. Those banks that cannot raise sufficient capital should be seized and their deposits sold off.”
For too long the government has been taking the banks at their own words, which is one reason we keep getting surprised with demands for more bailout cash. The Treasury needs to be doing its own brutal, burn-down analysis of every major bank’s balance sheet — and then acting accordingly.
In recent years, “whenever other countries — Russia, Thailand, Indonesia, South Korea or Mexico — got themselves into an economic crisis, we lectured them about how they had to adopt ‘shock therapy,’ ” said Moisés Naím, editor of Foreign Policy magazine. “But now that we are the ones in crisis and in need of shock therapy, everyone is preaching gradualism.”
A stimulus package that does not also unclog the arteries of our banking system will never stimulate sufficiently. Mr. Obama should take the pain early, blame it all on George Bush and then reap the benefits down the road. Postpone the pain, postpone the recovery.
January 20, 2009
Op-Ed Columnist
The Politics of Cohesion
By DAVID BROOKS
In 1962, Daniel Bell published a book called “The End of Ideology.” The title struck a nerve because it reflected the view, common at the time, that the United States was about to leave behind the brutal, ideological politics that had characterized the 1930s and the early cold war. The 1960s, it was believed, would be a decade of cool pragmatism. Keynesian models would be used to scientifically regulate the economy. Important decisions would be made empirically.
Instead, we got what Francis Fukuyama later called The Great Disruption. The information economy began to disrupt the industrial economy. The feminist revolution disrupted gender and family relations. The civil rights revolution disrupted social arrangements. The Vietnam War discredited the establishment.
These disruptions were generally necessary and good, but the transition was painful. People lost faith in old social norms, but new ones had not yet emerged. The result was disorder. Divorce rates skyrocketed. Crime rates exploded. Faith in institutions collapsed. Social trust cratered.
As community bonds dissolved, individual autonomy asserted itself. Liberals championed the moral liberation of individuals. Conservatives championed their economic liberation. The combined result was a loss of community and social cohesion, and what Christopher Lasch called a culture of narcissism.
Instead of ending ideology, the Great Disruption produced ideological politics. The weakening of social norms led to fierce battles as groups vied to create new ones. Personal became political. Groups fought over basic patterns of morality.
Republicans tended to win elections because liberals were associated with disorder and conservatives with attempts to restore it. Yet both sides were infected with the same pulverizing style. Politics wasn’t just about allocating resources. It was a contest over values, lifestyles and the status of your tribe. This venomous style dominated politics straight through the two baby boomer presidencies — of Clinton and Bush.
But societies do mend themselves, slowly and organically. In 2002, Rick Warren wrote a phenomenally popular book called “The Purpose Driven Life.” The first sentence was, “It’s not about you.” That was a sign that the age of expressive individualism was coming to an end. New community patterns and social norms were coalescing.
Crime rates had begun to fall, along with teen pregnancy rates and a rash of other social indicators. Young people flocked to perform community service. Couples created families that sought to harvest the gains of feminism while preserving the best of traditionalism.
In the cultural realm, the Great Disruption came to an end. New social norms and patterns settled into place. Barack Obama exemplifies the social repair. The product of a scattered family, he has created a highly traditional one, headed by two professionally accomplished adults. To an almost eerie extent, he exemplifies discipline, equipoise and self-control. Under his leadership, as Peter Beinart noted in Time, Democrats came to seem like the party of order while Republicans were associated with disorder.
Obama’s challenge will be to translate the social repair that has occurred over the past decade into political and governing repair. Part of that will be done with his inaugural address today. Look for him to emphasize the themes of responsibility, cohesion and unity. Look for him to reject the culture, which lingered in the financial world, of anything goes.
Part of that will be done with his governing style. Obama aims to realize the end-of-ideology politics that Daniel Bell and others glimpsed in the early 1960s. He sees himself as a pragmatist, an empiricist. Politics is not personal with him. He does not turn political disagreements into a status contest between one kind of person and another. He is convinced that most Americans practice their politics between the 40-yard lines.
Part will be accomplished with his aggressive outreach efforts. Already he has cooperated with Republicans. He has rejected the counsel of the old liberal warriors who want retribution and insularity.
But the real test will come in the realm of policy. The next few months will be occupied with the stimulus package. And anybody who is not terrified by the prospect of spending $800 billion hastily has not spent enough time studying the difference between economic textbooks and the way government actually operates.
But after that, folks in the Obama camp hope to create a Grand Bargain. That would mean building on a culture of cohesion and tackling the issues that require joint sacrifice — like reducing deficits, fixing Medicare and Social Security and reforming health care. These problems were insoluble during the era of division and distrust. In the climactic season of his presidency, the winter of 2010, Obama would seek to fundamentally restore balance to American government.
If he can do that, the Great Disruption would truly be over. The next chapter in American history would begin on firmer ground.
Op-Ed Columnist
The Politics of Cohesion
By DAVID BROOKS
In 1962, Daniel Bell published a book called “The End of Ideology.” The title struck a nerve because it reflected the view, common at the time, that the United States was about to leave behind the brutal, ideological politics that had characterized the 1930s and the early cold war. The 1960s, it was believed, would be a decade of cool pragmatism. Keynesian models would be used to scientifically regulate the economy. Important decisions would be made empirically.
Instead, we got what Francis Fukuyama later called The Great Disruption. The information economy began to disrupt the industrial economy. The feminist revolution disrupted gender and family relations. The civil rights revolution disrupted social arrangements. The Vietnam War discredited the establishment.
These disruptions were generally necessary and good, but the transition was painful. People lost faith in old social norms, but new ones had not yet emerged. The result was disorder. Divorce rates skyrocketed. Crime rates exploded. Faith in institutions collapsed. Social trust cratered.
As community bonds dissolved, individual autonomy asserted itself. Liberals championed the moral liberation of individuals. Conservatives championed their economic liberation. The combined result was a loss of community and social cohesion, and what Christopher Lasch called a culture of narcissism.
Instead of ending ideology, the Great Disruption produced ideological politics. The weakening of social norms led to fierce battles as groups vied to create new ones. Personal became political. Groups fought over basic patterns of morality.
Republicans tended to win elections because liberals were associated with disorder and conservatives with attempts to restore it. Yet both sides were infected with the same pulverizing style. Politics wasn’t just about allocating resources. It was a contest over values, lifestyles and the status of your tribe. This venomous style dominated politics straight through the two baby boomer presidencies — of Clinton and Bush.
But societies do mend themselves, slowly and organically. In 2002, Rick Warren wrote a phenomenally popular book called “The Purpose Driven Life.” The first sentence was, “It’s not about you.” That was a sign that the age of expressive individualism was coming to an end. New community patterns and social norms were coalescing.
Crime rates had begun to fall, along with teen pregnancy rates and a rash of other social indicators. Young people flocked to perform community service. Couples created families that sought to harvest the gains of feminism while preserving the best of traditionalism.
In the cultural realm, the Great Disruption came to an end. New social norms and patterns settled into place. Barack Obama exemplifies the social repair. The product of a scattered family, he has created a highly traditional one, headed by two professionally accomplished adults. To an almost eerie extent, he exemplifies discipline, equipoise and self-control. Under his leadership, as Peter Beinart noted in Time, Democrats came to seem like the party of order while Republicans were associated with disorder.
Obama’s challenge will be to translate the social repair that has occurred over the past decade into political and governing repair. Part of that will be done with his inaugural address today. Look for him to emphasize the themes of responsibility, cohesion and unity. Look for him to reject the culture, which lingered in the financial world, of anything goes.
Part of that will be done with his governing style. Obama aims to realize the end-of-ideology politics that Daniel Bell and others glimpsed in the early 1960s. He sees himself as a pragmatist, an empiricist. Politics is not personal with him. He does not turn political disagreements into a status contest between one kind of person and another. He is convinced that most Americans practice their politics between the 40-yard lines.
Part will be accomplished with his aggressive outreach efforts. Already he has cooperated with Republicans. He has rejected the counsel of the old liberal warriors who want retribution and insularity.
But the real test will come in the realm of policy. The next few months will be occupied with the stimulus package. And anybody who is not terrified by the prospect of spending $800 billion hastily has not spent enough time studying the difference between economic textbooks and the way government actually operates.
But after that, folks in the Obama camp hope to create a Grand Bargain. That would mean building on a culture of cohesion and tackling the issues that require joint sacrifice — like reducing deficits, fixing Medicare and Social Security and reforming health care. These problems were insoluble during the era of division and distrust. In the climactic season of his presidency, the winter of 2010, Obama would seek to fundamentally restore balance to American government.
If he can do that, the Great Disruption would truly be over. The next chapter in American history would begin on firmer ground.
January 22, 2009
Op-Ed Columnist
The Remaking of America
By NICHOLAS D. KRISTOF
At the end of Bill Clinton’s presidency in January 2001, the Web site The Onion declared: “Our long national nightmare of peace and prosperity is over.”
That was supposed to be satire, but in retrospect it proved a shrewd analysis. One measure of the bleak trajectory of the last eight years is that today The Onion looks equally astute when it says of the latest transition: “Black man given nation’s worst job.”
That man is making an excellent start, and news Web sites all over the world capture the globe’s eagerness — even desperation — for American leadership.
“Let the remaking of America begin today,” declared The Guardian, in Britain. The Independent called Inauguration Day “a day for hope.”
In Germany, Chancellor Angela Merkel spoke of “a truly great hour for America” that offered “a multitude of opportunities.” The Times of India welcomed “a new beginning.” In Northern Ireland, The Belfast Telegraph asked: “Can Obama save us all?”
A BBC poll in 17 nations found that on average 67 percent believed that President Obama would improve America’s relations with the rest of the world; just 5 percent thought the opposite (or maybe feared that if they seemed critical of George W. Bush, they would be waterboarded).
Two themes were particularly reassuring in Mr. Obama’s Inaugural Address. One was his inclusiveness, his effort to tug people into his big tent, a huge contrast from Mr. Bush’s years of governing from an ideological pup tent.
President Obama’s inclusiveness started with his celebration of America as a patchwork of “Christians and Muslims, Jews and Hindus — and nonbelievers.” If you know of any other sitting president who has dared to embrace atheists (Thomas Jefferson did, but not while in office), post the information on my blog, nytimes.com/ontheground).
Mr. Obama was also the first president to use the word “Muslim” in an Inaugural Address. In an oblique olive branch that I took to be directed toward Iran and Syria, he said: “We will extend a hand if you are willing to unclench your fist.”
The second reassuring theme has to do with “hard power” and “soft power,” in the terminology of Joseph Nye, a Harvard professor. In the Bush-Cheney years, America sought to rely overwhelmingly on military “hard power,” and the result was setbacks around the world, from Iran’s accelerated nuclear program to North Korea’s processing of plutonium for a half-dozen nuclear weapons (compared with zero during the Clinton presidency).
As my colleague David Sanger documents in his superb new book, “The Inheritance”: “We pursued a path that has left us less admired by our allies, less feared by our enemies, and less capable of convincing the rest of the world that our economic and political model is worthy of emulation.”
Mr. Obama’s first attempt at soft power is the nifty new White House Web site, complete with a White House blog. In his Inaugural Address, Mr. Obama focused on soft power alongside hard power: “Our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.”
Tempering qualities? Dick Cheney never wanted to temper anything, including his temper.
This mix of soft and hard power is what Professor Nye calls “smart power” — an update of Teddy Roosevelt’s notion of speaking softly and carrying a big stick — and it seems to be an emerging theme of the new administration. Hillary Rodham Clinton emphasized it in her confirmation hearings.
Professor Nye said that Mr. Obama’s inaugural was a perfect example of smart power. “That’s not going to make our adversaries roll over, but it’ll help in terms of mainstream Muslims and it’ll help in terms of allies,” Mr. Nye said. “And it’ll give a very different tone to foreign policy.”
Now the world will be watching to see if Mr. Obama’s policy matches his rhetoric. The economy will be paramount, of course, but it will take months or years to judge results there.
In the meantime, there are two immediate litmus tests by which the world will begin to judge Mr. Obama at once. The first will be his handling of Guantánamo and torture — the architects of those Bush policies did more damage to America than anyone confined in Guantánamo — and it was reassuring that Mr. Obama promptly suspended action by military tribunals.
A second test is Middle East policy. The Bush policy of (mostly) disengagement and obliviousness to Palestinian suffering has made it harder to achieve a peace that is the best hope for Israelis and Palestinians alike. Mr. Obama’s calls Wednesday to Middle Eastern leaders were helpful, and he should immediately make clear that he wants Israel to halt the settlements and ease repressive restrictions on the West Bank.
These steps would reassure the world that its hopes for a new day in Washington just may be justified.
Op-Ed Columnist
The Remaking of America
By NICHOLAS D. KRISTOF
At the end of Bill Clinton’s presidency in January 2001, the Web site The Onion declared: “Our long national nightmare of peace and prosperity is over.”
That was supposed to be satire, but in retrospect it proved a shrewd analysis. One measure of the bleak trajectory of the last eight years is that today The Onion looks equally astute when it says of the latest transition: “Black man given nation’s worst job.”
That man is making an excellent start, and news Web sites all over the world capture the globe’s eagerness — even desperation — for American leadership.
“Let the remaking of America begin today,” declared The Guardian, in Britain. The Independent called Inauguration Day “a day for hope.”
In Germany, Chancellor Angela Merkel spoke of “a truly great hour for America” that offered “a multitude of opportunities.” The Times of India welcomed “a new beginning.” In Northern Ireland, The Belfast Telegraph asked: “Can Obama save us all?”
A BBC poll in 17 nations found that on average 67 percent believed that President Obama would improve America’s relations with the rest of the world; just 5 percent thought the opposite (or maybe feared that if they seemed critical of George W. Bush, they would be waterboarded).
Two themes were particularly reassuring in Mr. Obama’s Inaugural Address. One was his inclusiveness, his effort to tug people into his big tent, a huge contrast from Mr. Bush’s years of governing from an ideological pup tent.
President Obama’s inclusiveness started with his celebration of America as a patchwork of “Christians and Muslims, Jews and Hindus — and nonbelievers.” If you know of any other sitting president who has dared to embrace atheists (Thomas Jefferson did, but not while in office), post the information on my blog, nytimes.com/ontheground).
Mr. Obama was also the first president to use the word “Muslim” in an Inaugural Address. In an oblique olive branch that I took to be directed toward Iran and Syria, he said: “We will extend a hand if you are willing to unclench your fist.”
The second reassuring theme has to do with “hard power” and “soft power,” in the terminology of Joseph Nye, a Harvard professor. In the Bush-Cheney years, America sought to rely overwhelmingly on military “hard power,” and the result was setbacks around the world, from Iran’s accelerated nuclear program to North Korea’s processing of plutonium for a half-dozen nuclear weapons (compared with zero during the Clinton presidency).
As my colleague David Sanger documents in his superb new book, “The Inheritance”: “We pursued a path that has left us less admired by our allies, less feared by our enemies, and less capable of convincing the rest of the world that our economic and political model is worthy of emulation.”
Mr. Obama’s first attempt at soft power is the nifty new White House Web site, complete with a White House blog. In his Inaugural Address, Mr. Obama focused on soft power alongside hard power: “Our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.”
Tempering qualities? Dick Cheney never wanted to temper anything, including his temper.
This mix of soft and hard power is what Professor Nye calls “smart power” — an update of Teddy Roosevelt’s notion of speaking softly and carrying a big stick — and it seems to be an emerging theme of the new administration. Hillary Rodham Clinton emphasized it in her confirmation hearings.
Professor Nye said that Mr. Obama’s inaugural was a perfect example of smart power. “That’s not going to make our adversaries roll over, but it’ll help in terms of mainstream Muslims and it’ll help in terms of allies,” Mr. Nye said. “And it’ll give a very different tone to foreign policy.”
Now the world will be watching to see if Mr. Obama’s policy matches his rhetoric. The economy will be paramount, of course, but it will take months or years to judge results there.
In the meantime, there are two immediate litmus tests by which the world will begin to judge Mr. Obama at once. The first will be his handling of Guantánamo and torture — the architects of those Bush policies did more damage to America than anyone confined in Guantánamo — and it was reassuring that Mr. Obama promptly suspended action by military tribunals.
A second test is Middle East policy. The Bush policy of (mostly) disengagement and obliviousness to Palestinian suffering has made it harder to achieve a peace that is the best hope for Israelis and Palestinians alike. Mr. Obama’s calls Wednesday to Middle Eastern leaders were helpful, and he should immediately make clear that he wants Israel to halt the settlements and ease repressive restrictions on the West Bank.
These steps would reassure the world that its hopes for a new day in Washington just may be justified.
January 24, 2009
Op-Ed Columnist
More Than Charisma
By BOB HERBERT
Boston
On a rainy October night in 2006, I took a cab to the John F. Kennedy library here to conduct a very public interview. As we pulled up, the driver asked, “Who’s on the program?”
“Barack Obama,” I said.
“Oh,” he replied, “our next president.”
I mentioned this to then-Senator Obama during the program and he got a good laugh out of it. He hadn’t yet announced that he was running. The capacity crowd in the auditorium was clear about what it wanted. It cheered every mention of a possible run. Obama-mania was already well under way, and it would only grow.
I was back at the library this week to interview Gwen Ifill about her new book, “The Breakthrough: Politics and Race in the Age of Obama,” and I wondered aloud about this continuing love affair with all things Obama — the feverish excitement, the widespread joy and pride, and the remarkable surge of hope in an otherwise downbeat, if not depressing, period.
Where was all this coming from? What was it about?
Yes, as everyone agrees, Mr. Obama is handsome, fit, smart, and a great speaker. As Ms. Ifill noted in her book, “Voters are attracted to youth, vitality and change.”
And Americans tend to get giddy over winners, especially underdogs who take the measure of a foe thought to be impregnable — in this case, the mighty forces carefully assembled over several years by the Clintons.
And it’s not just the president himself who looks good. Even the shameless purveyors of fantasy at central casting would blush at the thought of crafting a family as picture perfect as the Obamas. So, yes, there is an awful lot to like about the Obama phenomenon.
But I’ve seen charismatic politicians and pretty families come and go like sunrises and sunsets over the years. There was something more that was making people go ga-ga over Obama. Something deeper.
We’ve been watching that something this week, and it’s called leadership. Mr. Obama has been feeding the almost desperate hunger in this country for mature leadership, for someone who is not reckless and clownish, shortsighted and self-absorbed.
However you feel about his policies, and there are people grumbling on the right and on the left, Mr. Obama has signaled loudly and clearly that the era of irresponsible behavior in public office is over.
No more crazy wars. No more torture, and no more throwing people in prison without even the semblance of due process. No more napping while critical problems like the Israeli-Palestinian conflict, global warming, and economic inequality in the United States grow steadily worse.
“We remain a young nation,” Mr. Obama said in his Inaugural Address, “but in the words of Scripture, the time has come to set aside childish things.”
On Wednesday, his first full day in office, the president took steps to make the federal government more transparent, signaling immediately that the country would move away from the toxic levels of secrecy that marked the Bush years.
“Transparency and rule of law will be the touchstones of this presidency,” he said. It was a commitment to responsible behavior, and a challenge to the public to hold the Obama administration accountable. It reminded me of the wonderful line written into a federal appeals court ruling in 2002 by Judge Damon Keith:
“Democracies die behind closed doors.”
This has been the Obama way, to set a responsible example and then to call on others to follow his mature lead. In Iowa, after his victory in the Democratic caucuses a year ago, he promised to be “a president who will be honest about the choices and challenges we face, who will listen to you and learn from you, even when we disagree, who won’t just tell you what you want to hear, but what you need to know.”
In a cynical age, the inclination is to dismiss this stuff as so much political rhetoric. But Mr. Obama carries himself in a way that suggests he means what he says, which gives him great credibility when he urges Americans to work hard and make sacrifices, not just for themselves and their families but for the common good — and when he tells black audiences that young men need to hitch up their trousers and behave themselves, and that families need to turn off the TV so the kids can do their homework.
Or when he says of the many serious challenges facing the nation, as he did in his Inaugural Address: “They will not be met easily or in a short span of time. But know this, America: They will be met.”
The bond is growing between the nation and its new young leader. Let’s hope it’s a mature romance that weathers the long haul.
Op-Ed Columnist
More Than Charisma
By BOB HERBERT
Boston
On a rainy October night in 2006, I took a cab to the John F. Kennedy library here to conduct a very public interview. As we pulled up, the driver asked, “Who’s on the program?”
“Barack Obama,” I said.
“Oh,” he replied, “our next president.”
I mentioned this to then-Senator Obama during the program and he got a good laugh out of it. He hadn’t yet announced that he was running. The capacity crowd in the auditorium was clear about what it wanted. It cheered every mention of a possible run. Obama-mania was already well under way, and it would only grow.
I was back at the library this week to interview Gwen Ifill about her new book, “The Breakthrough: Politics and Race in the Age of Obama,” and I wondered aloud about this continuing love affair with all things Obama — the feverish excitement, the widespread joy and pride, and the remarkable surge of hope in an otherwise downbeat, if not depressing, period.
Where was all this coming from? What was it about?
Yes, as everyone agrees, Mr. Obama is handsome, fit, smart, and a great speaker. As Ms. Ifill noted in her book, “Voters are attracted to youth, vitality and change.”
And Americans tend to get giddy over winners, especially underdogs who take the measure of a foe thought to be impregnable — in this case, the mighty forces carefully assembled over several years by the Clintons.
And it’s not just the president himself who looks good. Even the shameless purveyors of fantasy at central casting would blush at the thought of crafting a family as picture perfect as the Obamas. So, yes, there is an awful lot to like about the Obama phenomenon.
But I’ve seen charismatic politicians and pretty families come and go like sunrises and sunsets over the years. There was something more that was making people go ga-ga over Obama. Something deeper.
We’ve been watching that something this week, and it’s called leadership. Mr. Obama has been feeding the almost desperate hunger in this country for mature leadership, for someone who is not reckless and clownish, shortsighted and self-absorbed.
However you feel about his policies, and there are people grumbling on the right and on the left, Mr. Obama has signaled loudly and clearly that the era of irresponsible behavior in public office is over.
No more crazy wars. No more torture, and no more throwing people in prison without even the semblance of due process. No more napping while critical problems like the Israeli-Palestinian conflict, global warming, and economic inequality in the United States grow steadily worse.
“We remain a young nation,” Mr. Obama said in his Inaugural Address, “but in the words of Scripture, the time has come to set aside childish things.”
On Wednesday, his first full day in office, the president took steps to make the federal government more transparent, signaling immediately that the country would move away from the toxic levels of secrecy that marked the Bush years.
“Transparency and rule of law will be the touchstones of this presidency,” he said. It was a commitment to responsible behavior, and a challenge to the public to hold the Obama administration accountable. It reminded me of the wonderful line written into a federal appeals court ruling in 2002 by Judge Damon Keith:
“Democracies die behind closed doors.”
This has been the Obama way, to set a responsible example and then to call on others to follow his mature lead. In Iowa, after his victory in the Democratic caucuses a year ago, he promised to be “a president who will be honest about the choices and challenges we face, who will listen to you and learn from you, even when we disagree, who won’t just tell you what you want to hear, but what you need to know.”
In a cynical age, the inclination is to dismiss this stuff as so much political rhetoric. But Mr. Obama carries himself in a way that suggests he means what he says, which gives him great credibility when he urges Americans to work hard and make sacrifices, not just for themselves and their families but for the common good — and when he tells black audiences that young men need to hitch up their trousers and behave themselves, and that families need to turn off the TV so the kids can do their homework.
Or when he says of the many serious challenges facing the nation, as he did in his Inaugural Address: “They will not be met easily or in a short span of time. But know this, America: They will be met.”
The bond is growing between the nation and its new young leader. Let’s hope it’s a mature romance that weathers the long haul.
January 27, 2009
What Life Asks of Us
By DAVID BROOKS
A few years ago, a faculty committee at Harvard produced a report on the purpose of education. “The aim of a liberal education” the report declared, “is to unsettle presumptions, to defamiliarize the familiar, to reveal what is going on beneath and behind appearances, to disorient young people and to help them to find ways to reorient themselves.”
The report implied an entire way of living. Individuals should learn to think for themselves. They should be skeptical of pre-existing arrangements. They should break free from the way they were raised, examine life from the outside and discover their own values.
This approach is deeply consistent with the individualism of modern culture, with its emphasis on personal inquiry, personal self-discovery and personal happiness. But there is another, older way of living, and it was discussed in a neglected book that came out last summer called “On Thinking Institutionally” by the political scientist Hugh Heclo.
In this way of living, to borrow an old phrase, we are not defined by what we ask of life. We are defined by what life asks of us. As we go through life, we travel through institutions — first family and school, then the institutions of a profession or a craft.
Each of these institutions comes with certain rules and obligations that tell us how to do what we’re supposed to do. Journalism imposes habits that help reporters keep a mental distance from those they cover. Scientists have obligations to the community of researchers. In the process of absorbing the rules of the institutions we inhabit, we become who we are.
New generations don’t invent institutional practices. These practices are passed down and evolve. So the institutionalist has a deep reverence for those who came before and built up the rules that he has temporarily taken delivery of. “In taking delivery,” Heclo writes, “institutionalists see themselves as debtors who owe something, not creditors to whom something is owed.”
The rules of a profession or an institution are not like traffic regulations. They are deeply woven into the identity of the people who practice them. A teacher’s relationship to the craft of teaching, an athlete’s relationship to her sport, a farmer’s relation to her land is not an individual choice that can be easily reversed when psychic losses exceed psychic profits. Her social function defines who she is. The connection is more like a covenant. There will be many long periods when you put more into your institutions than you get out.
In 2005, Ryne Sandberg was inducted into the baseball Hall of Fame. Heclo cites his speech as an example of how people talk when they are defined by their devotion to an institution:
“I was in awe every time I walked onto the field. That’s respect. I was taught you never, ever disrespect your opponents or your teammates or your organization or your manager and never, ever your uniform. You make a great play, act like you’ve done it before; get a big hit, look for the third base coach and get ready to run the bases.”
Sandberg motioned to those inducted before him, “These guys sitting up here did not pave the way for the rest of us so that players could swing for the fences every time up and forget how to move a runner over to third. It’s disrespectful to them, to you and to the game of baseball that we all played growing up.
“Respect. A lot of people say this honor validates my career, but I didn’t work hard for validation. I didn’t play the game right because I saw a reward at the end of the tunnel. I played it right because that’s what you’re supposed to do, play it right and with respect ... . If this validates anything, it’s that guys who taught me the game ... did what they were supposed to do, and I did what I was supposed to do.”
I thought it worth devoting a column to institutional thinking because I try to keep a list of the people in public life I admire most. Invariably, the people who make that list have subjugated themselves to their profession, social function or institution.
Second, institutional thinking is eroding. Faith in all institutions, including charities, has declined precipitously over the past generation, not only in the U.S. but around the world. Lack of institutional awareness has bred cynicism and undermined habits of behavior. Bankers, for example, used to have a code that made them a bit stodgy and which held them up for ridicule in movies like “Mary Poppins.” But the banker’s code has eroded, and the result was not liberation but self-destruction.
Institutions do all the things that are supposed to be bad. They impede personal exploration. They enforce conformity.
But they often save us from our weaknesses and give meaning to life.
What Life Asks of Us
By DAVID BROOKS
A few years ago, a faculty committee at Harvard produced a report on the purpose of education. “The aim of a liberal education” the report declared, “is to unsettle presumptions, to defamiliarize the familiar, to reveal what is going on beneath and behind appearances, to disorient young people and to help them to find ways to reorient themselves.”
The report implied an entire way of living. Individuals should learn to think for themselves. They should be skeptical of pre-existing arrangements. They should break free from the way they were raised, examine life from the outside and discover their own values.
This approach is deeply consistent with the individualism of modern culture, with its emphasis on personal inquiry, personal self-discovery and personal happiness. But there is another, older way of living, and it was discussed in a neglected book that came out last summer called “On Thinking Institutionally” by the political scientist Hugh Heclo.
In this way of living, to borrow an old phrase, we are not defined by what we ask of life. We are defined by what life asks of us. As we go through life, we travel through institutions — first family and school, then the institutions of a profession or a craft.
Each of these institutions comes with certain rules and obligations that tell us how to do what we’re supposed to do. Journalism imposes habits that help reporters keep a mental distance from those they cover. Scientists have obligations to the community of researchers. In the process of absorbing the rules of the institutions we inhabit, we become who we are.
New generations don’t invent institutional practices. These practices are passed down and evolve. So the institutionalist has a deep reverence for those who came before and built up the rules that he has temporarily taken delivery of. “In taking delivery,” Heclo writes, “institutionalists see themselves as debtors who owe something, not creditors to whom something is owed.”
The rules of a profession or an institution are not like traffic regulations. They are deeply woven into the identity of the people who practice them. A teacher’s relationship to the craft of teaching, an athlete’s relationship to her sport, a farmer’s relation to her land is not an individual choice that can be easily reversed when psychic losses exceed psychic profits. Her social function defines who she is. The connection is more like a covenant. There will be many long periods when you put more into your institutions than you get out.
In 2005, Ryne Sandberg was inducted into the baseball Hall of Fame. Heclo cites his speech as an example of how people talk when they are defined by their devotion to an institution:
“I was in awe every time I walked onto the field. That’s respect. I was taught you never, ever disrespect your opponents or your teammates or your organization or your manager and never, ever your uniform. You make a great play, act like you’ve done it before; get a big hit, look for the third base coach and get ready to run the bases.”
Sandberg motioned to those inducted before him, “These guys sitting up here did not pave the way for the rest of us so that players could swing for the fences every time up and forget how to move a runner over to third. It’s disrespectful to them, to you and to the game of baseball that we all played growing up.
“Respect. A lot of people say this honor validates my career, but I didn’t work hard for validation. I didn’t play the game right because I saw a reward at the end of the tunnel. I played it right because that’s what you’re supposed to do, play it right and with respect ... . If this validates anything, it’s that guys who taught me the game ... did what they were supposed to do, and I did what I was supposed to do.”
I thought it worth devoting a column to institutional thinking because I try to keep a list of the people in public life I admire most. Invariably, the people who make that list have subjugated themselves to their profession, social function or institution.
Second, institutional thinking is eroding. Faith in all institutions, including charities, has declined precipitously over the past generation, not only in the U.S. but around the world. Lack of institutional awareness has bred cynicism and undermined habits of behavior. Bankers, for example, used to have a code that made them a bit stodgy and which held them up for ridicule in movies like “Mary Poppins.” But the banker’s code has eroded, and the result was not liberation but self-destruction.
Institutions do all the things that are supposed to be bad. They impede personal exploration. They enforce conformity.
But they often save us from our weaknesses and give meaning to life.
January 27, 2009
Essay
Elevating Science, Elevating Democracy
By DENNIS OVERBYE
All right, I was weeping too.
To be honest, the restoration of science was the least of it, but when Barack Obama proclaimed during his Inaugural Address that he would “restore science to its rightful place,” you could feel a dark cloud lifting like a sigh from the shoulders of the scientific community in this country.
When the new president went on vowing to harness the sun, the wind and the soil, and to “wield technology’s wonders,” I felt the glow of a spring sunrise washing my cheeks, and I could almost imagine I heard the music of swords being hammered into plowshares.
Wow. My first reaction was to worry that scientists were now in the awkward position of being expected to save the world. As they say, be careful what you wish for.
My second reaction was to wonder what the “rightful place” of science in our society really is.
The answer, I would argue, is On a Pedestal — but not for the reasons you might think.
Forget about penicillin, digital computers and even the Big Bang, passing fads all of them.
The knock on science from its cultural and religious critics is that it is arrogant and materialistic. It tells us wondrous things about nature and how to manipulate it, but not what we should do with this knowledge and power. The Big Bang doesn’t tell us how to live, or whether God loves us, or whether there is any God at all. It provides scant counsel on same-sex marriage or eating meat. It is silent on the desirability of mutual assured destruction as a strategy for deterring nuclear war.
Einstein seemed to echo this thought when he said, “I have never obtained any ethical values from my scientific work.” Science teaches facts, not values, the story goes.
Worse, not only does it not provide any values of its own, say its detractors, it also undermines the ones we already have, devaluing anything it can’t measure, reducing sunsets to wavelengths and romance to jiggly hormones. It destroys myths and robs the universe of its magic and mystery.
So the story goes.
But this is balderdash. Science is not a monument of received Truth but something that people do to look for truth.
That endeavor, which has transformed the world in the last few centuries, does indeed teach values. Those values, among others, are honesty, doubt, respect for evidence, openness, accountability and tolerance and indeed hunger for opposing points of view. These are the unabashedly pragmatic working principles that guide the buzzing, testing, poking, probing, argumentative, gossiping, gadgety, joking, dreaming and tendentious cloud of activity — the writer and biologist Lewis Thomas once likened it to an anthill — that is slowly and thoroughly penetrating every nook and cranny of the world.
Nobody appeared in a cloud of smoke and taught scientists these virtues. This behavior simply evolved because it worked.
It requires no metaphysical commitment to a God or any conception of human origin or nature to join in this game, just the hypothesis that nature can be interrogated and that nature is the final arbiter. Jews, Catholics, Muslims, atheists, Buddhists and Hindus have all been working side by side building the Large Hadron Collider and its detectors these last few years.
And indeed there is no leader, no grand plan, for this hive. It is in many ways utopian anarchy, a virtual community that lives as much on the Internet and in airport coffee shops as in any one place or time. Or at least it is as utopian as any community largely dependent on government and corporate financing can be.
Arguably science is the most successful human activity of all time. Which is not to say that life within it is always utopian, as several of my colleagues have pointed out in articles about pharmaceutical industry payments to medical researchers.
But nobody was ever sent to prison for espousing the wrong value for the Hubble constant. There is always room for more data to argue over.
So if you’re going to get gooey about something, that’s not so bad.
It is no coincidence that these are the same qualities that make for democracy and that they arose as a collective behavior about the same time that parliamentary democracies were appearing. If there is anything democracy requires and thrives on, it is the willingness to embrace debate and respect one another and the freedom to shun received wisdom. Science and democracy have always been twins.
Today that dynamic is most clearly and perhaps crucially tested in China. As I pondered Mr. Obama’s words, I thought of Xu Liangying, an elderly Chinese physicist and Einstein scholar I met a couple of years ago, who has spent most of his life under house arrest for upholding Einstein’s maxim that there is no science without freedom of speech.
The converse might also be true. The habit of questioning that you learn in physics is invaluable in the rest of society. As Fang Lizhi, Dr. Xu’s fellow dissident whose writings helped spark the 1989 Tiananmen Square demonstrations and who now teaches at the University of Arizona, said in 1985, “Physics is more than a basis for technology; it is a cornerstone of modern thought.”
If we are not practicing good science, we probably aren’t practicing good democracy. And vice versa.
Science and democracy have been the watchwords of Chinese political aspirations for more than a century. When the Communist Party took power it sought to appropriate at least the scientific side of the equation. Here, for example, is what Hu Yaobang, the party’s general secretary, said in 1980. “Science is what it is simply because it can break down fetishes and superstitions and is bold in explorations and because it opposes following the beaten path and dares to destroy outmoded conventions and bad customs.”
Brave words that have yet to be allowed to come true in China. Mr. Hu was purged, and in fact it was to mourn his death that students first began assembling in Tiananmen Square in 1989.
Dr. Fang got in trouble initially because he favored the Big Bang, but that was against Marxist orthodoxy that the universe was infinitely unfolding. Marxism, it might be remembered, was once promoted as a scientific theory, but some subjects were off-limits.
But once you can’t talk about one subject, the origin of the universe, for example, sooner or later other subjects are going to be off-limits, like global warming, birth control and abortion, or evolution, the subject of yet another dustup in Texas last week.
There is no democracy in China, and some would argue that despite that nation’s vast resources and potential, there will not be vigorous science there either until the Chinese leaders take seriously what Mao proclaimed back in 1955 and then cynically withdrew: Let a hundred flowers bloom, let a hundred schools of thought contend.
In the meantime I look forward to Mr. Obama’s cultivation of our own wild and beautiful garden.
http://www.nytimes.com/2009/01/27/scien ... nted=print
Essay
Elevating Science, Elevating Democracy
By DENNIS OVERBYE
All right, I was weeping too.
To be honest, the restoration of science was the least of it, but when Barack Obama proclaimed during his Inaugural Address that he would “restore science to its rightful place,” you could feel a dark cloud lifting like a sigh from the shoulders of the scientific community in this country.
When the new president went on vowing to harness the sun, the wind and the soil, and to “wield technology’s wonders,” I felt the glow of a spring sunrise washing my cheeks, and I could almost imagine I heard the music of swords being hammered into plowshares.
Wow. My first reaction was to worry that scientists were now in the awkward position of being expected to save the world. As they say, be careful what you wish for.
My second reaction was to wonder what the “rightful place” of science in our society really is.
The answer, I would argue, is On a Pedestal — but not for the reasons you might think.
Forget about penicillin, digital computers and even the Big Bang, passing fads all of them.
The knock on science from its cultural and religious critics is that it is arrogant and materialistic. It tells us wondrous things about nature and how to manipulate it, but not what we should do with this knowledge and power. The Big Bang doesn’t tell us how to live, or whether God loves us, or whether there is any God at all. It provides scant counsel on same-sex marriage or eating meat. It is silent on the desirability of mutual assured destruction as a strategy for deterring nuclear war.
Einstein seemed to echo this thought when he said, “I have never obtained any ethical values from my scientific work.” Science teaches facts, not values, the story goes.
Worse, not only does it not provide any values of its own, say its detractors, it also undermines the ones we already have, devaluing anything it can’t measure, reducing sunsets to wavelengths and romance to jiggly hormones. It destroys myths and robs the universe of its magic and mystery.
So the story goes.
But this is balderdash. Science is not a monument of received Truth but something that people do to look for truth.
That endeavor, which has transformed the world in the last few centuries, does indeed teach values. Those values, among others, are honesty, doubt, respect for evidence, openness, accountability and tolerance and indeed hunger for opposing points of view. These are the unabashedly pragmatic working principles that guide the buzzing, testing, poking, probing, argumentative, gossiping, gadgety, joking, dreaming and tendentious cloud of activity — the writer and biologist Lewis Thomas once likened it to an anthill — that is slowly and thoroughly penetrating every nook and cranny of the world.
Nobody appeared in a cloud of smoke and taught scientists these virtues. This behavior simply evolved because it worked.
It requires no metaphysical commitment to a God or any conception of human origin or nature to join in this game, just the hypothesis that nature can be interrogated and that nature is the final arbiter. Jews, Catholics, Muslims, atheists, Buddhists and Hindus have all been working side by side building the Large Hadron Collider and its detectors these last few years.
And indeed there is no leader, no grand plan, for this hive. It is in many ways utopian anarchy, a virtual community that lives as much on the Internet and in airport coffee shops as in any one place or time. Or at least it is as utopian as any community largely dependent on government and corporate financing can be.
Arguably science is the most successful human activity of all time. Which is not to say that life within it is always utopian, as several of my colleagues have pointed out in articles about pharmaceutical industry payments to medical researchers.
But nobody was ever sent to prison for espousing the wrong value for the Hubble constant. There is always room for more data to argue over.
So if you’re going to get gooey about something, that’s not so bad.
It is no coincidence that these are the same qualities that make for democracy and that they arose as a collective behavior about the same time that parliamentary democracies were appearing. If there is anything democracy requires and thrives on, it is the willingness to embrace debate and respect one another and the freedom to shun received wisdom. Science and democracy have always been twins.
Today that dynamic is most clearly and perhaps crucially tested in China. As I pondered Mr. Obama’s words, I thought of Xu Liangying, an elderly Chinese physicist and Einstein scholar I met a couple of years ago, who has spent most of his life under house arrest for upholding Einstein’s maxim that there is no science without freedom of speech.
The converse might also be true. The habit of questioning that you learn in physics is invaluable in the rest of society. As Fang Lizhi, Dr. Xu’s fellow dissident whose writings helped spark the 1989 Tiananmen Square demonstrations and who now teaches at the University of Arizona, said in 1985, “Physics is more than a basis for technology; it is a cornerstone of modern thought.”
If we are not practicing good science, we probably aren’t practicing good democracy. And vice versa.
Science and democracy have been the watchwords of Chinese political aspirations for more than a century. When the Communist Party took power it sought to appropriate at least the scientific side of the equation. Here, for example, is what Hu Yaobang, the party’s general secretary, said in 1980. “Science is what it is simply because it can break down fetishes and superstitions and is bold in explorations and because it opposes following the beaten path and dares to destroy outmoded conventions and bad customs.”
Brave words that have yet to be allowed to come true in China. Mr. Hu was purged, and in fact it was to mourn his death that students first began assembling in Tiananmen Square in 1989.
Dr. Fang got in trouble initially because he favored the Big Bang, but that was against Marxist orthodoxy that the universe was infinitely unfolding. Marxism, it might be remembered, was once promoted as a scientific theory, but some subjects were off-limits.
But once you can’t talk about one subject, the origin of the universe, for example, sooner or later other subjects are going to be off-limits, like global warming, birth control and abortion, or evolution, the subject of yet another dustup in Texas last week.
There is no democracy in China, and some would argue that despite that nation’s vast resources and potential, there will not be vigorous science there either until the Chinese leaders take seriously what Mao proclaimed back in 1955 and then cynically withdrew: Let a hundred flowers bloom, let a hundred schools of thought contend.
In the meantime I look forward to Mr. Obama’s cultivation of our own wild and beautiful garden.
http://www.nytimes.com/2009/01/27/scien ... nted=print
February 1, 2009
Op-Ed Columnist
Elvis Has Left the Mountain
By THOMAS L. FRIEDMAN
DAVOS, Switzerland
In its own unpredictable way, the Davos World Economic Forum usually serves as a crude barometer of the latest mood or mania on the world stage. This year did not disappoint. What has struck me is the quiet urgency that infused so many panel discussions and private conversations here between investors, politicians and social activists. To put it crudely: everyone is looking for the guy — the guy who can tell you exactly what ails the world’s financial system, exactly how we get out of this mess and exactly what you should be doing to protect your savings.
But here’s what’s really scary: the guy isn’t here. He’s left the building. Elvis has left the mountain. Get used to it.
What do I mean? First, if it is not apparent to you yet, it will be soon: there is no magic bullet for this economic crisis, no magic bailout package, no magic stimulus. We have woven such a tangled financial mess with subprime mortgages wrapped in complex bonds and derivatives, pumped up with leverage, and then globalized to the far corners of the earth that, much as we want to think this will soon be over, that is highly unlikely.
We are going to have to learn to live with a lot more uncertainty for a lot longer than our generation has ever experienced. We keep pouring money into the dark banking hole of this crisis, desperately hoping that we will hear it hit bottom and start to pile up. But so far, as hard as we listen, we can’t hear a thing. And so we keep pouring ...
A broker friend told me it reminded him of when he was a teenager and his doctor first diagnosed him as unable to digest wheat products. He said to the doctor, “Well, just give me a pill.” And the doctor told him: there is no pill. “You mean I’m just going to have to live with this?” he asked. That’s us. There is no pill — not for this mess.
The fact that there is no single pill doesn’t mean there’s nothing to be done. We need a stimulus big enough to create more jobs. We need to remove toxic assets from bank balance sheets. We need the Treasury to close the insolvent banks, merge the weak ones and strengthen the healthy few. And we need to do each one right. But even then, the turnaround will be neither quick nor painless. Indeed, the whispers here were that what has been an exclusively economic crisis up to now may soon morph into a domino of political crises — as happened in Iceland, where the bankruptcy of the banks toppled the government on Monday.
(Davos humor: What is the capital of Iceland? Answer: $25.)
Second, we’re going to have to get used to a loss of trust. All those rock-solid people and institutions that we trusted with our money, our pensions and our kids’ piggybank savings — like Citigroup, Merrill Lynch, Bank of America — do not seem trustworthy anymore. Never before in my adult life have I looked around at every bank in my town and said, “I’m not sure I wouldn’t prefer to put my paycheck in a mattress.”
The Bernard Madoff scandal, of course, has only reinforced that loss of trust. His degree of betrayal — his alleged willingness to embezzle the life savings of people whom he had known his whole life — is so coldhearted that it charts new territory in human behavior. He’s on his way to becoming an adjective. Money managers are already being asked prove to prospective new clients that their internal safeguards are “Madoff proof.”
I’ve written a lot about the Indian outsourcing community, so I knew B. Ramalinga Raju, the Satyam chairman accused of embezzling $1 billion from his own company. What’s really sad is that I didn’t get to know him through his business but through an interest in his family’s charitable work. They created India’s first 911 emergency system in their home state and call centers in Indian villages, so young people there could get service jobs. Was all that a fake, too? Or was he just an embezzler with a good heart? Don’t know. When you can’t even trust a person’s charitable work, you’ve hit a new low.
“We’re all going to have to learn to live with a lower level of trust in our lives,” an African banker friend said to me here. But the mind recoils at that, which may explain why so many people I talked to here are hoping that President Obama will turn out to be the guy.
Like Harry Truman, Obama is definitely present at the creation of something. He is arriving on the scene “not after a war but after the same kind of shattering of institutions that a war does,” said Peter Schwartz, chairman of the Global Business Network. “His job is to restore confidence to these institutions that have been at the foundation of our economy.”
That may be President Obama’s most important bailout task: to educate the country that there is no easy escape here, except taking our medicine, getting our fundamentals right again and working our way out of this, brick by brick, by getting back to making money — what was that old Smith Barney ad? — “the old-fashioned way” — by earning it.
Op-Ed Columnist
Elvis Has Left the Mountain
By THOMAS L. FRIEDMAN
DAVOS, Switzerland
In its own unpredictable way, the Davos World Economic Forum usually serves as a crude barometer of the latest mood or mania on the world stage. This year did not disappoint. What has struck me is the quiet urgency that infused so many panel discussions and private conversations here between investors, politicians and social activists. To put it crudely: everyone is looking for the guy — the guy who can tell you exactly what ails the world’s financial system, exactly how we get out of this mess and exactly what you should be doing to protect your savings.
But here’s what’s really scary: the guy isn’t here. He’s left the building. Elvis has left the mountain. Get used to it.
What do I mean? First, if it is not apparent to you yet, it will be soon: there is no magic bullet for this economic crisis, no magic bailout package, no magic stimulus. We have woven such a tangled financial mess with subprime mortgages wrapped in complex bonds and derivatives, pumped up with leverage, and then globalized to the far corners of the earth that, much as we want to think this will soon be over, that is highly unlikely.
We are going to have to learn to live with a lot more uncertainty for a lot longer than our generation has ever experienced. We keep pouring money into the dark banking hole of this crisis, desperately hoping that we will hear it hit bottom and start to pile up. But so far, as hard as we listen, we can’t hear a thing. And so we keep pouring ...
A broker friend told me it reminded him of when he was a teenager and his doctor first diagnosed him as unable to digest wheat products. He said to the doctor, “Well, just give me a pill.” And the doctor told him: there is no pill. “You mean I’m just going to have to live with this?” he asked. That’s us. There is no pill — not for this mess.
The fact that there is no single pill doesn’t mean there’s nothing to be done. We need a stimulus big enough to create more jobs. We need to remove toxic assets from bank balance sheets. We need the Treasury to close the insolvent banks, merge the weak ones and strengthen the healthy few. And we need to do each one right. But even then, the turnaround will be neither quick nor painless. Indeed, the whispers here were that what has been an exclusively economic crisis up to now may soon morph into a domino of political crises — as happened in Iceland, where the bankruptcy of the banks toppled the government on Monday.
(Davos humor: What is the capital of Iceland? Answer: $25.)
Second, we’re going to have to get used to a loss of trust. All those rock-solid people and institutions that we trusted with our money, our pensions and our kids’ piggybank savings — like Citigroup, Merrill Lynch, Bank of America — do not seem trustworthy anymore. Never before in my adult life have I looked around at every bank in my town and said, “I’m not sure I wouldn’t prefer to put my paycheck in a mattress.”
The Bernard Madoff scandal, of course, has only reinforced that loss of trust. His degree of betrayal — his alleged willingness to embezzle the life savings of people whom he had known his whole life — is so coldhearted that it charts new territory in human behavior. He’s on his way to becoming an adjective. Money managers are already being asked prove to prospective new clients that their internal safeguards are “Madoff proof.”
I’ve written a lot about the Indian outsourcing community, so I knew B. Ramalinga Raju, the Satyam chairman accused of embezzling $1 billion from his own company. What’s really sad is that I didn’t get to know him through his business but through an interest in his family’s charitable work. They created India’s first 911 emergency system in their home state and call centers in Indian villages, so young people there could get service jobs. Was all that a fake, too? Or was he just an embezzler with a good heart? Don’t know. When you can’t even trust a person’s charitable work, you’ve hit a new low.
“We’re all going to have to learn to live with a lower level of trust in our lives,” an African banker friend said to me here. But the mind recoils at that, which may explain why so many people I talked to here are hoping that President Obama will turn out to be the guy.
Like Harry Truman, Obama is definitely present at the creation of something. He is arriving on the scene “not after a war but after the same kind of shattering of institutions that a war does,” said Peter Schwartz, chairman of the Global Business Network. “His job is to restore confidence to these institutions that have been at the foundation of our economy.”
That may be President Obama’s most important bailout task: to educate the country that there is no easy escape here, except taking our medicine, getting our fundamentals right again and working our way out of this, brick by brick, by getting back to making money — what was that old Smith Barney ad? — “the old-fashioned way” — by earning it.
February 8, 2009
Op-Ed Columnist
Mistresses of the Universe
By NICHOLAS D. KRISTOF
Banks around the world desperately want bailouts of billions of dollars, but they also have another need they’re unaware of: women, women and women.
At the recent World Economic Forum in Davos, Switzerland, some of the most interesting discussions revolved around whether we would be in the same mess today if Lehman Brothers had been Lehman Sisters. The consensus (and this is among the dead white men who parade annually at Davos) is that the optimal bank would have been Lehman Brothers and Sisters.
Wall Street is one of the most male-dominated bastions in the business world; senior staff meetings resemble a urologist’s waiting room. Aside from issues of fairness, there’s evidence that the result is second-rate decision-making.
“There seems to be a strong consensus that diverse groups perform better at problem solving” than homogeneous groups, Lu Hong and Scott E. Page wrote in The Journal of Economic Theory, summarizing the research in the field.
A fascinating British study supports that conclusion with evidence from the drool of financiers. The researchers, using the saliva of male traders, tracked natural variations of testosterone in the morning and the amount of profits they earned for the firm that day.
“We found that a trader’s morning testosterone level predicts his day’s profitability,” reported the study, published last year in The Proceedings of the National Academy of Sciences. Higher testosterone meant more risk-taking and, usually, more money.
On its own, that might suggest that men have an advantage on the trading floor. Yet the same study also suggested that elevated testosterone levels could lead to greater assumption of risk; high testosterone levels “may shift risk preferences and even affect a trader’s ability to engage in rational choice.” In other words: when male traders crash ... boy, they crash.
So could it be that the problem on Wall Street wasn’t subprime mortgages, but elevated testosterone?
It’s important to be skeptical of some of the research: often it seems to be conducted or studied by those who have strong views about gender. And it’s generally true that research conducted on matters pertaining to fairness or social justice rarely has the rigor of research conducted on, say, particle physics.
Yet the number of studies reaching similar conclusions from different directions is striking.
One of the shortcomings of any system of men sitting in front of screens making financial bets was reported last year in the journal Evolution and Human Behavior, in case you missed your copy. That study found that men are particularly likely to make high-risk bets when under financial pressure and surrounded by other males of similar status.
As for women, their risk-taking was unaffected by this kind of peer pressure.
The study’s authors point to an evolutionary hangover. Across cultures, women prefer high-status men, while a woman’s reproductive prospects depend much less on her social status. Thus, when men of similar status gather, they jockey for an edge and jostle for the alpha role — and try to get ahead with high-stakes gambles.
On the plus side, boasting about these financial bets might make a great pickup line. On the downside, the bank goes bust.
A greater gender balance could reduce some of these unhelpful consequences of male herding. After all, we also saw some unexpected gains from the balance resulting from women’s suffrage.
Skeptics have noted that the first president elected after women got the national vote was Warren Harding — an embarrassment to female voters ever since. Yet a remarkable study published recently in The Quarterly Journal of Economics by Grant Miller of Stanford University indicates that female voters did have a profound and positive impact.
Professor Miller examined states where women won the vote before national enfranchisement. He found that when a state gave women the vote, politicians there quickly began behaving differently — in particular, devoting about 35 percent more money to new public health programs. These programs were seen as a priority for women, and the politicians wanted to curry favor with them.
The same happened at the national level: the 19th Amendment of 1920 was followed a year later by the Sheppard-Towner Act, a landmark public health measure, because members of Congress believed that was what women wanted. The upshot of all this was a sharp decline in child mortality, with Professor Miller attributing 20,000 fewer deaths nationally each year to the impact of women’s suffrage.
I’m skeptical of any effort to force banks to accept more women (one woman on the board for every $100 million handout?). But looking at the evidence of how homogeneous groups go astray, let’s all hope that banks seek a little more diversity on their own — just as desperately as they’re seeking bailouts.
•
I invite you to comment on this column on my blog, On the Ground. Please also join me on Facebook, watch my YouTube videos and follow me on Twitter.
http://www.nytimes.com/2009/02/08/opini ... nted=print
Op-Ed Columnist
Mistresses of the Universe
By NICHOLAS D. KRISTOF
Banks around the world desperately want bailouts of billions of dollars, but they also have another need they’re unaware of: women, women and women.
At the recent World Economic Forum in Davos, Switzerland, some of the most interesting discussions revolved around whether we would be in the same mess today if Lehman Brothers had been Lehman Sisters. The consensus (and this is among the dead white men who parade annually at Davos) is that the optimal bank would have been Lehman Brothers and Sisters.
Wall Street is one of the most male-dominated bastions in the business world; senior staff meetings resemble a urologist’s waiting room. Aside from issues of fairness, there’s evidence that the result is second-rate decision-making.
“There seems to be a strong consensus that diverse groups perform better at problem solving” than homogeneous groups, Lu Hong and Scott E. Page wrote in The Journal of Economic Theory, summarizing the research in the field.
A fascinating British study supports that conclusion with evidence from the drool of financiers. The researchers, using the saliva of male traders, tracked natural variations of testosterone in the morning and the amount of profits they earned for the firm that day.
“We found that a trader’s morning testosterone level predicts his day’s profitability,” reported the study, published last year in The Proceedings of the National Academy of Sciences. Higher testosterone meant more risk-taking and, usually, more money.
On its own, that might suggest that men have an advantage on the trading floor. Yet the same study also suggested that elevated testosterone levels could lead to greater assumption of risk; high testosterone levels “may shift risk preferences and even affect a trader’s ability to engage in rational choice.” In other words: when male traders crash ... boy, they crash.
So could it be that the problem on Wall Street wasn’t subprime mortgages, but elevated testosterone?
It’s important to be skeptical of some of the research: often it seems to be conducted or studied by those who have strong views about gender. And it’s generally true that research conducted on matters pertaining to fairness or social justice rarely has the rigor of research conducted on, say, particle physics.
Yet the number of studies reaching similar conclusions from different directions is striking.
One of the shortcomings of any system of men sitting in front of screens making financial bets was reported last year in the journal Evolution and Human Behavior, in case you missed your copy. That study found that men are particularly likely to make high-risk bets when under financial pressure and surrounded by other males of similar status.
As for women, their risk-taking was unaffected by this kind of peer pressure.
The study’s authors point to an evolutionary hangover. Across cultures, women prefer high-status men, while a woman’s reproductive prospects depend much less on her social status. Thus, when men of similar status gather, they jockey for an edge and jostle for the alpha role — and try to get ahead with high-stakes gambles.
On the plus side, boasting about these financial bets might make a great pickup line. On the downside, the bank goes bust.
A greater gender balance could reduce some of these unhelpful consequences of male herding. After all, we also saw some unexpected gains from the balance resulting from women’s suffrage.
Skeptics have noted that the first president elected after women got the national vote was Warren Harding — an embarrassment to female voters ever since. Yet a remarkable study published recently in The Quarterly Journal of Economics by Grant Miller of Stanford University indicates that female voters did have a profound and positive impact.
Professor Miller examined states where women won the vote before national enfranchisement. He found that when a state gave women the vote, politicians there quickly began behaving differently — in particular, devoting about 35 percent more money to new public health programs. These programs were seen as a priority for women, and the politicians wanted to curry favor with them.
The same happened at the national level: the 19th Amendment of 1920 was followed a year later by the Sheppard-Towner Act, a landmark public health measure, because members of Congress believed that was what women wanted. The upshot of all this was a sharp decline in child mortality, with Professor Miller attributing 20,000 fewer deaths nationally each year to the impact of women’s suffrage.
I’m skeptical of any effort to force banks to accept more women (one woman on the board for every $100 million handout?). But looking at the evidence of how homogeneous groups go astray, let’s all hope that banks seek a little more diversity on their own — just as desperately as they’re seeking bailouts.
•
I invite you to comment on this column on my blog, On the Ground. Please also join me on Facebook, watch my YouTube videos and follow me on Twitter.
http://www.nytimes.com/2009/02/08/opini ... nted=print
February 11, 2009
Op-Ed Columnist
The Open-Door Bailout
By THOMAS L. FRIEDMAN
Bangalore, India
Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.
“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”
While his tongue was slightly in cheek, Gupta and many other Indian business people I spoke to this week were trying to make a point that sometimes non-Americans can make best: “Dear America, please remember how you got to be the wealthiest country in history. It wasn’t through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat, stir and repeat, stir and repeat, stir and repeat.”
While I think President Obama has been doing his best to keep the worst protectionist impulses in Congress out of his stimulus plan, the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and other financial institutions that receive taxpayer bailout money from hiring high-skilled immigrants on temporary work permits known as H-1B visas.
Bad signal. In an age when attracting the first-round intellectual draft choices from around the world is the most important competitive advantage a knowledge economy can have, why would we add barriers against such brainpower — anywhere? That’s called “Old Europe.” That’s spelled: S-T-U-P-I-D.
“If you do this, it will be one of the best things for India and one of the worst for Americans, [because] Indians will be forced to innovate at home,” said Subhash B. Dhar, a member of the executive council that runs Infosys, the well-known Indian technology company that sends Indian workers to the U.S. to support a wide range of firms. “We protected our jobs for many years and look where it got us. Do you know that for an Indian company, it is still easier to do business with a company in the U.S. than it is to do business today with another Indian state?”
Each Indian state tries to protect its little economy with its own rules. America should not be trying to copy that. “Your attitude,” said Dhar, should be “ ‘whoever can make us competitive and dominant, let’s bring them in.’ ”
If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off.
We live in a technological age where every study shows that the more knowledge you have as a worker and the more knowledge workers you have as an economy, the faster your incomes will rise. Therefore, the centerpiece of our stimulus, the core driving principle, should be to stimulate everything that makes us smarter and attracts more smart people to our shores. That is the best way to create good jobs.
According to research by Vivek Wadhwa, a senior research associate at the Labor and Worklife Program at Harvard Law School, more than half of Silicon Valley start-ups were founded by immigrants over the last decade. These immigrant-founded tech companies employed 450,000 workers and had sales of $52 billion in 2005, said Wadhwa in an essay published this week on BusinessWeek.com.
He also cited a recent study by William R. Kerr of Harvard Business School and William F. Lincoln of the University of Michigan that “found that in periods when H-1B visa numbers went down, so did patent applications filed by immigrants [in the U.S.]. And when H-1B visa numbers went up, patent applications followed suit.”
We don’t want to come out of this crisis with just inflation, a mountain of debt and more shovel-ready jobs. We want to — we have to — come out of it with a new Intel, Google, Microsoft and Apple. I would have loved to have seen the stimulus package include a government-funded venture capital bank to help finance all the start-ups that are clearly not starting up today — in the clean-energy space they’re dying like flies — because of a lack of liquidity from traditional lending sources.
Newsweek had an essay this week that began: “Could Silicon Valley become another Detroit?” Well, yes, it could. When the best brains in the world are on sale, you don’t shut them out. You open your doors wider. We need to attack this financial crisis with green cards not just greenbacks, and with start-ups not just bailouts. One Detroit is enough.
Op-Ed Columnist
The Open-Door Bailout
By THOMAS L. FRIEDMAN
Bangalore, India
Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.
“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”
While his tongue was slightly in cheek, Gupta and many other Indian business people I spoke to this week were trying to make a point that sometimes non-Americans can make best: “Dear America, please remember how you got to be the wealthiest country in history. It wasn’t through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat, stir and repeat, stir and repeat, stir and repeat.”
While I think President Obama has been doing his best to keep the worst protectionist impulses in Congress out of his stimulus plan, the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and other financial institutions that receive taxpayer bailout money from hiring high-skilled immigrants on temporary work permits known as H-1B visas.
Bad signal. In an age when attracting the first-round intellectual draft choices from around the world is the most important competitive advantage a knowledge economy can have, why would we add barriers against such brainpower — anywhere? That’s called “Old Europe.” That’s spelled: S-T-U-P-I-D.
“If you do this, it will be one of the best things for India and one of the worst for Americans, [because] Indians will be forced to innovate at home,” said Subhash B. Dhar, a member of the executive council that runs Infosys, the well-known Indian technology company that sends Indian workers to the U.S. to support a wide range of firms. “We protected our jobs for many years and look where it got us. Do you know that for an Indian company, it is still easier to do business with a company in the U.S. than it is to do business today with another Indian state?”
Each Indian state tries to protect its little economy with its own rules. America should not be trying to copy that. “Your attitude,” said Dhar, should be “ ‘whoever can make us competitive and dominant, let’s bring them in.’ ”
If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off.
We live in a technological age where every study shows that the more knowledge you have as a worker and the more knowledge workers you have as an economy, the faster your incomes will rise. Therefore, the centerpiece of our stimulus, the core driving principle, should be to stimulate everything that makes us smarter and attracts more smart people to our shores. That is the best way to create good jobs.
According to research by Vivek Wadhwa, a senior research associate at the Labor and Worklife Program at Harvard Law School, more than half of Silicon Valley start-ups were founded by immigrants over the last decade. These immigrant-founded tech companies employed 450,000 workers and had sales of $52 billion in 2005, said Wadhwa in an essay published this week on BusinessWeek.com.
He also cited a recent study by William R. Kerr of Harvard Business School and William F. Lincoln of the University of Michigan that “found that in periods when H-1B visa numbers went down, so did patent applications filed by immigrants [in the U.S.]. And when H-1B visa numbers went up, patent applications followed suit.”
We don’t want to come out of this crisis with just inflation, a mountain of debt and more shovel-ready jobs. We want to — we have to — come out of it with a new Intel, Google, Microsoft and Apple. I would have loved to have seen the stimulus package include a government-funded venture capital bank to help finance all the start-ups that are clearly not starting up today — in the clean-energy space they’re dying like flies — because of a lack of liquidity from traditional lending sources.
Newsweek had an essay this week that began: “Could Silicon Valley become another Detroit?” Well, yes, it could. When the best brains in the world are on sale, you don’t shut them out. You open your doors wider. We need to attack this financial crisis with green cards not just greenbacks, and with start-ups not just bailouts. One Detroit is enough.
The article below is about the importance of free and independent press in shaping opinions and strengthening governance and democratic processes.
February 14, 2009
Editorial | Editorial Observer
What Newspapers Do, Have Done and Will Do
By EDUARDO PORTER
Outside the shrinking guild of scribblers, it’s disappointingly hard to find much sympathy for the beleaguered newspaper industry. Only 18 percent of Americans believe all or most of what The New York Times publishes, according to a poll last year by the Pew Research Center. If the Internet is putting us out of business, who cares?
It matters. The argument that if newspapers go bust there will be nobody covering city hall is true. It’s also true that corruption will rise, legislation will more easily be captured by vested interests and voter turnout will fall.
In 1981, the Indian economist Amartya Sen argued that the famine caused by China’s Great Leap Forward could never have happened in India because the government could not have ignored the plight of its people. “Newspapers play an important part in this,” he said.
From the poorest country to the richest, a welter of academic research since then points to the importance of an independent press — mostly newspapers — in disseminating hard-to-get information, mobilizing the public and putting pressure on government and businesses in favor of the public good.
During the Great Depression, the Federal Emergency Relief Administration doled out more money in counties with more radios. Today, Hispanic voter turnout is higher, relative to the non-Hispanic vote, where there is a local Spanish-language TV station.
Companies in countries with a larger daily newspaper circulation are fairer to minority shareholders and have a better record responding to environmental concerns. And a 2000 study by Timothy Besley and Robin Burgess of the London School of Economics proved Sen to be right: governments in India provide more public food and disaster relief in hard times in states where newspaper circulation is higher.
It’s easy to forget the role of an independent press in the development of democratic institutions in the United States. Through much of the 19th century, newspapers were mostly partisan mouthpieces. But as circulation and advertising grew, they shed political allegiances and started competing for customers by investigating shady deals and taking up populist causes.
Claudia Goldin and Edward Glaeser of Harvard University and Matthew Gentzkow of the University of Chicago found that between 1870 and 1920, the share of political dailies that claimed to be independent rose from 11 percent to between 40 percent and 60 percent. Corruption, measured by an index of articles mentioning the topic in The Times, plummeted by four-fifths over this period.
From the creation of the Food and Drug Administration to limits on working hours, a lot of progressive-era reforms might have failed without an independent press. Luigi Zingales of the University of Chicago, Alexander Dyck of the University of Toronto and David Moss of Harvard Business School analyzed muckraking magazines of the period, like McClure’s and Collier’s.
Analyzing Congressional votes on regulatory legislation related to issues covered in these magazines, the researchers found that representatives in districts in which the magazines had larger circulations became more favorable to the populist causes exposed in their articles. Cosmopolitan’s 1906 series “Treason in the Senate” pushed many senators in 1911 to vote for the 17th Amendment, which mandated that senators be elected by popular vote rather than chosen by governors. It had been soundly rejected in 1902.
These days, even the harshest newspaper critics admit that citizens need information. They argue that the Internet will empower ordinary people to do the task themselves, better.
I’m not so sure. In a recent study, Mr. Gentzkow concluded that the introduction of television in the 1940s and 1950s was responsible for between a quarter and a half of the decline in voter turnout since then, as Americans cut back on local newspapers and radio, which had more political content.
Some alternatives, like Politico.com and ProPublica, an investigative reporting outfit financed by philanthropy, do original journalism. But they are tiny. Cash-strapped TV stations depend on newspapers for much of their local news coverage. Cable news is increasingly commentary. And rather than a citizen reporter, the Internet has given us the citizen pundit, who comments on: newspaper articles.
Reporting the news in far-flung countries, spending weeks on investigations of uncertain payoff, fighting for freedom of information in court — is expensive. Virtually the only entities still doing it on the necessary scale are newspapers. Letting them go on the expectation that the Internet will enable a better-informed citizenry seems like a risky bet.
February 14, 2009
Editorial | Editorial Observer
What Newspapers Do, Have Done and Will Do
By EDUARDO PORTER
Outside the shrinking guild of scribblers, it’s disappointingly hard to find much sympathy for the beleaguered newspaper industry. Only 18 percent of Americans believe all or most of what The New York Times publishes, according to a poll last year by the Pew Research Center. If the Internet is putting us out of business, who cares?
It matters. The argument that if newspapers go bust there will be nobody covering city hall is true. It’s also true that corruption will rise, legislation will more easily be captured by vested interests and voter turnout will fall.
In 1981, the Indian economist Amartya Sen argued that the famine caused by China’s Great Leap Forward could never have happened in India because the government could not have ignored the plight of its people. “Newspapers play an important part in this,” he said.
From the poorest country to the richest, a welter of academic research since then points to the importance of an independent press — mostly newspapers — in disseminating hard-to-get information, mobilizing the public and putting pressure on government and businesses in favor of the public good.
During the Great Depression, the Federal Emergency Relief Administration doled out more money in counties with more radios. Today, Hispanic voter turnout is higher, relative to the non-Hispanic vote, where there is a local Spanish-language TV station.
Companies in countries with a larger daily newspaper circulation are fairer to minority shareholders and have a better record responding to environmental concerns. And a 2000 study by Timothy Besley and Robin Burgess of the London School of Economics proved Sen to be right: governments in India provide more public food and disaster relief in hard times in states where newspaper circulation is higher.
It’s easy to forget the role of an independent press in the development of democratic institutions in the United States. Through much of the 19th century, newspapers were mostly partisan mouthpieces. But as circulation and advertising grew, they shed political allegiances and started competing for customers by investigating shady deals and taking up populist causes.
Claudia Goldin and Edward Glaeser of Harvard University and Matthew Gentzkow of the University of Chicago found that between 1870 and 1920, the share of political dailies that claimed to be independent rose from 11 percent to between 40 percent and 60 percent. Corruption, measured by an index of articles mentioning the topic in The Times, plummeted by four-fifths over this period.
From the creation of the Food and Drug Administration to limits on working hours, a lot of progressive-era reforms might have failed without an independent press. Luigi Zingales of the University of Chicago, Alexander Dyck of the University of Toronto and David Moss of Harvard Business School analyzed muckraking magazines of the period, like McClure’s and Collier’s.
Analyzing Congressional votes on regulatory legislation related to issues covered in these magazines, the researchers found that representatives in districts in which the magazines had larger circulations became more favorable to the populist causes exposed in their articles. Cosmopolitan’s 1906 series “Treason in the Senate” pushed many senators in 1911 to vote for the 17th Amendment, which mandated that senators be elected by popular vote rather than chosen by governors. It had been soundly rejected in 1902.
These days, even the harshest newspaper critics admit that citizens need information. They argue that the Internet will empower ordinary people to do the task themselves, better.
I’m not so sure. In a recent study, Mr. Gentzkow concluded that the introduction of television in the 1940s and 1950s was responsible for between a quarter and a half of the decline in voter turnout since then, as Americans cut back on local newspapers and radio, which had more political content.
Some alternatives, like Politico.com and ProPublica, an investigative reporting outfit financed by philanthropy, do original journalism. But they are tiny. Cash-strapped TV stations depend on newspapers for much of their local news coverage. Cable news is increasingly commentary. And rather than a citizen reporter, the Internet has given us the citizen pundit, who comments on: newspaper articles.
Reporting the news in far-flung countries, spending weeks on investigations of uncertain payoff, fighting for freedom of information in court — is expensive. Virtually the only entities still doing it on the necessary scale are newspapers. Letting them go on the expectation that the Internet will enable a better-informed citizenry seems like a risky bet.
February 20, 2009
Op-Ed Columnist
Money for Idiots
By DAVID BROOKS
Our moral and economic system is based on individual responsibility. It’s based on the idea that people have to live with the consequences of their decisions. This makes them more careful deciders. This means that society tends toward justice — people get what they deserve as much as possible
Over the last few months, we’ve made a hash of all that. The Bush and Obama administrations have compensated foolishness and irresponsibility. The financial bailouts reward bankers who took insane risks. The auto bailouts subsidize companies and unions that made self-indulgent decisions a few decades ago that drove their industry into the ground.
The stimulus package handed tens of billions of dollars to states that spent profligately during the prosperity years. The Obama housing plan will force people who bought sensible homes to subsidize the mortgages of people who bought houses they could not afford. It will almost certainly force people who were honest on their loan forms to subsidize people who were dishonest on theirs.
These injustices are stoking anger across the country, lustily expressed by Rick Santelli on CNBC Thursday morning. “The government is promoting bad behavior!” Santelli cried as Chicago traders cheered him on. “The president ... should put up a Web site ... to have people vote ... to see if they want to subsidize losers’ mortgages!”
Well, in some cases we probably do. That’s because government isn’t fundamentally in the Last Judgment business, making sure everybody serves penance for their sins. In times like these, government is fundamentally in the business of stabilizing the economic system as a whole.
Let me put it this way: Psychologists have a saying that when a couple comes in for marriage therapy, there are three patients in the room — the husband, the wife and the marriage itself. The marriage is the living history of all the things that have happened between husband and wife. Once the patterns are set, the marriage itself begins to shape their individual behavior. Though it exists in the space between them, it has an influence all its own.
In the same way, an economy has an economic culture. Out of billions of individual decisions, a common economic landscape emerges, which frames and influences the decisions everybody makes.
Right now, the economic landscape looks like that movie of the swaying Tacoma Narrows Bridge you might have seen in a high school science class. It started swinging in small ways and then the oscillations built on one another until the whole thing was freakishly alive and the pavement looked like liquid.
A few years ago, the global economic culture began swaying. The government enabled people to buy homes they couldn’t afford. The Fed provided easy money. The Chinese sloshed in oceans of capital. The giddy upward sway produced a crushing ride down.
These oscillations are the real moral hazard. Individual responsibility doesn’t mean much in an economy like this one. We all know people who have been laid off through no fault of their own. The responsible have been punished along with the profligate.
It makes sense for the government to intervene to try to reduce the oscillation. It makes sense for government to try to restore some communal order. And the sad reality is that in these circumstances government has to spend money on precisely those sectors that have been swinging most wildly — housing, finance, etc. It has to help stabilize people who have been idiots.
Actually executing this is a near-impossible task. Looking at the auto, housing and banking bailouts, we’re getting a sense of how the propeller heads around Obama operate. They try to put together programs that are bold, but without the huge interventions in the market implied by, say, nationalization. They’re balancing so many cross-pressures, they often come up with technocratic Rube Goldberg schemes that alter incentives in lots of medium and small ways. Some economists argue that the plans are too ineffectual, others that they are too opaque (estimates for the mortgage plan range from $75 billion to $275 billion and up). Personally, I hate the idea of 10 guys sitting around in the White House trying to redesign huge swaths of the U.S. economy on legal pads.
But at least they seem to be driven by a spirit of moderation and restraint. They seem to be trying to keep as many market structures in place as possible so things can return to normal relatively smoothly.
And they seem to understand the big thing. The nation’s economy is not just the sum of its individuals. It is an interwoven context that we all share. To stabilize that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize.
Op-Ed Columnist
Money for Idiots
By DAVID BROOKS
Our moral and economic system is based on individual responsibility. It’s based on the idea that people have to live with the consequences of their decisions. This makes them more careful deciders. This means that society tends toward justice — people get what they deserve as much as possible
Over the last few months, we’ve made a hash of all that. The Bush and Obama administrations have compensated foolishness and irresponsibility. The financial bailouts reward bankers who took insane risks. The auto bailouts subsidize companies and unions that made self-indulgent decisions a few decades ago that drove their industry into the ground.
The stimulus package handed tens of billions of dollars to states that spent profligately during the prosperity years. The Obama housing plan will force people who bought sensible homes to subsidize the mortgages of people who bought houses they could not afford. It will almost certainly force people who were honest on their loan forms to subsidize people who were dishonest on theirs.
These injustices are stoking anger across the country, lustily expressed by Rick Santelli on CNBC Thursday morning. “The government is promoting bad behavior!” Santelli cried as Chicago traders cheered him on. “The president ... should put up a Web site ... to have people vote ... to see if they want to subsidize losers’ mortgages!”
Well, in some cases we probably do. That’s because government isn’t fundamentally in the Last Judgment business, making sure everybody serves penance for their sins. In times like these, government is fundamentally in the business of stabilizing the economic system as a whole.
Let me put it this way: Psychologists have a saying that when a couple comes in for marriage therapy, there are three patients in the room — the husband, the wife and the marriage itself. The marriage is the living history of all the things that have happened between husband and wife. Once the patterns are set, the marriage itself begins to shape their individual behavior. Though it exists in the space between them, it has an influence all its own.
In the same way, an economy has an economic culture. Out of billions of individual decisions, a common economic landscape emerges, which frames and influences the decisions everybody makes.
Right now, the economic landscape looks like that movie of the swaying Tacoma Narrows Bridge you might have seen in a high school science class. It started swinging in small ways and then the oscillations built on one another until the whole thing was freakishly alive and the pavement looked like liquid.
A few years ago, the global economic culture began swaying. The government enabled people to buy homes they couldn’t afford. The Fed provided easy money. The Chinese sloshed in oceans of capital. The giddy upward sway produced a crushing ride down.
These oscillations are the real moral hazard. Individual responsibility doesn’t mean much in an economy like this one. We all know people who have been laid off through no fault of their own. The responsible have been punished along with the profligate.
It makes sense for the government to intervene to try to reduce the oscillation. It makes sense for government to try to restore some communal order. And the sad reality is that in these circumstances government has to spend money on precisely those sectors that have been swinging most wildly — housing, finance, etc. It has to help stabilize people who have been idiots.
Actually executing this is a near-impossible task. Looking at the auto, housing and banking bailouts, we’re getting a sense of how the propeller heads around Obama operate. They try to put together programs that are bold, but without the huge interventions in the market implied by, say, nationalization. They’re balancing so many cross-pressures, they often come up with technocratic Rube Goldberg schemes that alter incentives in lots of medium and small ways. Some economists argue that the plans are too ineffectual, others that they are too opaque (estimates for the mortgage plan range from $75 billion to $275 billion and up). Personally, I hate the idea of 10 guys sitting around in the White House trying to redesign huge swaths of the U.S. economy on legal pads.
But at least they seem to be driven by a spirit of moderation and restraint. They seem to be trying to keep as many market structures in place as possible so things can return to normal relatively smoothly.
And they seem to understand the big thing. The nation’s economy is not just the sum of its individuals. It is an interwoven context that we all share. To stabilize that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize.
During the GJ Padhramni Portugal, a Memorandum of Understanding was signed between the AKU and the Catholic University of Portugal. The rector Professor Manuel Braga da Cruz stated at the signing ceremony:
"Our intention with this agreement is to establish the basis to a future cooperation.
First of all in the perspective of studies in a comparative perspective, not only about our faith but also about the influence of our Faith in our countries, in our histories, in our international relations, in our civil life, in our law.”
The article below discusses how religion will impact future governance of societies especially with respect to international relations.
Wallace probes links between politics, religion
By Graeme Morton, Calgary HeraldFebruary 22, 2009 10:01 AM
Blessed Is the person who Can integrate what speaks to their soul into their daily work or study.
When you can blend two passions, the scenario is, dare we suggest, heavenly.
Jim Wallace's fervent interests in politics and religion fairly crackle down the phone line from his Boston office as he talks about the latest chapter in his life.
"International relations and religion is an emerging academic discipline and it's exciting to be studying and working with top people in this field," says Wallace, who is working toward a doctorate in the discipline at Boston University, with additional studies through instructors at Harvard.
"I want to be part of the conversation about practical ways to deal with this interaction of global politics and religion when they pop up in the world."
Wallace, who spent 23 years pastoring at South Calgary Community Church and became a leading figure in the city's faith community, returns to Calgary on March 11 to speak on God and Caesar in a Globalized, Polarized, Googlized, Terrorized World at a breakfast sponsored by the Centre for Faith and the Media.
He led the Calgary Evangelical Ministerial Association for six years and was a key figure in the high-profile campaign against permitting video lottery terminal gambling in pubs in 1999.While building bridges between Calgary's faith and political circles, Wallace became close friends with local political heavyweights such as Conservative MP Jim Prentice and former mayor Al Duerr.
Wallace and his wife Barton returned to his native Kentucky in the summer of 2005 to care for his aging parents. After that family situation stabilized, he took stock of his life.
"I had a number of good offers to pastor at churches," Wallace recalls. "But I felt I had enough tread on my tires to make one good run at tackling something new. The chance to pursue my dual interests in religion and politics was the clincher."
Wallace says the study of international relations and religion has only come into its own in the last handful of years --spurred by the events of Sept. 11, 2001.
"In the 1960s through the 1980s, there was a dominant thesis which held that as the world became more 'modern,' the natural byproduct was that it would become less religious and more secular," says Wallace.
"By the early 1990s, sociologists studied the data and realized that theory was wrong-- the world was becoming more 'furiously religious,' with radical fundamentalists in many faiths. Religion was becoming a much more contentious factor in international affairs and politics."
As a result, Wallace says, a generation of global leaders who were schooled in that secular thesis found themselves unprepared to deal with the new reality.
"Conflicts are inevitable, and the question becomes: How do you effectively address those conflicts? That's where the study and understanding of international relations and religion can play an important role," he adds.
Wallace is encouraged that the Obama administration is talking about new directions and embracing new attitudes in its early days.
"The president has been very intentional about being more inclusive in the White House Office of Faith-Based and Neighborhood Partnerships, which deals with domestic issues," says Wallace.
"But he has also made intentional reference to promoting inter-faith dialogues, both domestically and internationally."
Wallace is also involved in a global Christian-Muslim dialogue initiative called A Common Word, which is led by Jordan's Prince Ghazi.
"The title comes from a verse in the Qur'an which mentions, 'a common word between us and you,' referring to Muslims and the 'people of the Word,' Christians and Jews," says Wallace.
"It's bringing together prominent leaders from the Muslim and Christian worlds. And what's new is that the influential evangelical church community in the U. S. is becoming involved, where they hadn't been before."
Wallace says an emerging focus for international relations and religion study and policy in the coming years will be China.
"We're witnessing this absolute explosion of interest and involvement in religion in China, whether it's Christianity, Buddhism or Islam," notes Wallace.
"The Chinese leadership is encountering a scenario they haven't faced. They are wondering, 'how do we handle this.' "
While he and Barton are happily ensconced in Beantown, Wallace says part of their hearts never left Calgary.
"We come back every year and we still have many friends in both the religious and political worlds," says Wallace.
He's convinced his years in Calgary prepared him to play a role in an important field of academic pursuit.
"Both cities have a real entrepreneurial spirit to them which encourages people to think outside the box," says Wallace. "Calgary is a city that values ideas and intellect. Boston is a huge incubator for new ideas in all kinds of fields."
Richelle Wiseman of the Centre for Faith and the Media says Wallace's topic is timely and relevant for Calgarians.
"Anyone involved in overseas business or non-governmental organizations, not to mention politics, needs to understand the powerful dimension that religion plays in the cultures of many countries," says Wise-man.
"You just have to look at the troubles the Bush administration's foreign policy got into in Iraq by not fully comprehending the differences between the Sunni and Shiite Muslim perspectives."
Tickets for Wallace's March 11 talk, held at the Petroleum Club, are available at info@faithandmedia.org or by phone at 403-278-7357.
gmorton@theherald.canwest.com
*****
February 22, 2009
Op-Ed Columnist
Start Up the Risk-Takers
By THOMAS L. FRIEDMAN
Reading the news that General Motors and Chrysler are now lining up for another $20 billion or so in government aid — on top of the billions they’ve already received or requested — leaves me with the sick feeling that we are subsidizing the losers and for only one reason: because they claim that their funerals would cost more than keeping them on life support. Sorry, friends, but this is not the American way. Bailing out the losers is not how we got rich as a country, and it is not how we’ll get out of this crisis.
G.M. has become a giant wealth- destruction machine — possibly the biggest in history — and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labor agreements and new visions. When it comes to helping companies, precious public money should focus on start-ups, not bailouts.
You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.
If we are going to be spending billions of taxpayer dollars, it can’t only be on office-decorating bankers, over-leveraged home speculators and auto executives who year after year spent more energy resisting changes and lobbying Washington than leading change and beating Toyota.
I’ve been traveling all across the country on a book tour, and every evening I return to my hotel with my pockets full of business cards from inventors in clean energy. Our country is still bursting with innovators looking for capital. So, let’s make sure all the losers clamoring for help don’t drown out the potential winners who could lift us out of this. Some of our best companies, such as Intel, were started in recessions, when necessity makes innovators even more inventive and risk-takers even more daring.
Yes, we have to shore up the banking system, which underpins everything; and finding a fair way to prevent hardworking people, who played by the rules, from losing their homes to foreclosure is both right and essential for stability.
But beyond that, let’s think, talk and plan in more aspirational ways. We’re down, but we’re not out. As we invest taxpayer money, let’s do it with an eye to starting a new generation of biotech, info-tech, nanotech and clean-tech companies, with real innovators, real 21st-century jobs and potentially real profits for taxpayers. Our motto should be, “Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.”
To be fair, the stimulus package that the Obama team and the Democrats in Congress recently passed — with virtually no Republican help — goes some way toward doing just that. Hat’s off for that. Now let’s do more.
The renewable-energy business — wind, solar and solar thermal — was almost dead in this country. Most new projects stopped last fall because they depended for their financing on selling their renewable energy tax credits to Wall Street firms. As those Wall Street firms went bust or suffered steep losses, they had no need for tax credits because they had no profits to offset. The stimulus package created a mechanism for renewable energy innovators to bypass Wall Street and monetize their tax credits directly through the U.S. Treasury, for any project that starts between now and the end of 2010.
The wind and solar industries in America “were dead in the fourth quarter,” said John Woolard, chief executive of BrightSource Energy, which builds and operates cutting-edge solar-thermal plants in the Mojave Desert. Almost five gigawatts of new solar-thermal projects — the equivalent of five big nuclear plants — at various stages of permitting were being held up because of a lack of financing.
“All of these projects will now go ahead,” said Woolard. “You are talking about thousands of jobs ... We really got something right in this legislation.”
These jobs will be in engineering, constructing and operating huge solar systems and wind farms and manufacturing new photovoltaics. Together they will drive innovation in all these areas — and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the “ChinIndia price,” that is the price at which they can scale in China and India.
That is how taxpayer money should be used to stimulate: limited financing, for a limited time, targeted on an industry bristling with new technology start-ups that, with a little push from Uncle Sam, won’t just survive this crisis but help us thrive when it is over. We need, and the world needs, an America that is thriving not just surviving.
"Our intention with this agreement is to establish the basis to a future cooperation.
First of all in the perspective of studies in a comparative perspective, not only about our faith but also about the influence of our Faith in our countries, in our histories, in our international relations, in our civil life, in our law.”
The article below discusses how religion will impact future governance of societies especially with respect to international relations.
Wallace probes links between politics, religion
By Graeme Morton, Calgary HeraldFebruary 22, 2009 10:01 AM
Blessed Is the person who Can integrate what speaks to their soul into their daily work or study.
When you can blend two passions, the scenario is, dare we suggest, heavenly.
Jim Wallace's fervent interests in politics and religion fairly crackle down the phone line from his Boston office as he talks about the latest chapter in his life.
"International relations and religion is an emerging academic discipline and it's exciting to be studying and working with top people in this field," says Wallace, who is working toward a doctorate in the discipline at Boston University, with additional studies through instructors at Harvard.
"I want to be part of the conversation about practical ways to deal with this interaction of global politics and religion when they pop up in the world."
Wallace, who spent 23 years pastoring at South Calgary Community Church and became a leading figure in the city's faith community, returns to Calgary on March 11 to speak on God and Caesar in a Globalized, Polarized, Googlized, Terrorized World at a breakfast sponsored by the Centre for Faith and the Media.
He led the Calgary Evangelical Ministerial Association for six years and was a key figure in the high-profile campaign against permitting video lottery terminal gambling in pubs in 1999.While building bridges between Calgary's faith and political circles, Wallace became close friends with local political heavyweights such as Conservative MP Jim Prentice and former mayor Al Duerr.
Wallace and his wife Barton returned to his native Kentucky in the summer of 2005 to care for his aging parents. After that family situation stabilized, he took stock of his life.
"I had a number of good offers to pastor at churches," Wallace recalls. "But I felt I had enough tread on my tires to make one good run at tackling something new. The chance to pursue my dual interests in religion and politics was the clincher."
Wallace says the study of international relations and religion has only come into its own in the last handful of years --spurred by the events of Sept. 11, 2001.
"In the 1960s through the 1980s, there was a dominant thesis which held that as the world became more 'modern,' the natural byproduct was that it would become less religious and more secular," says Wallace.
"By the early 1990s, sociologists studied the data and realized that theory was wrong-- the world was becoming more 'furiously religious,' with radical fundamentalists in many faiths. Religion was becoming a much more contentious factor in international affairs and politics."
As a result, Wallace says, a generation of global leaders who were schooled in that secular thesis found themselves unprepared to deal with the new reality.
"Conflicts are inevitable, and the question becomes: How do you effectively address those conflicts? That's where the study and understanding of international relations and religion can play an important role," he adds.
Wallace is encouraged that the Obama administration is talking about new directions and embracing new attitudes in its early days.
"The president has been very intentional about being more inclusive in the White House Office of Faith-Based and Neighborhood Partnerships, which deals with domestic issues," says Wallace.
"But he has also made intentional reference to promoting inter-faith dialogues, both domestically and internationally."
Wallace is also involved in a global Christian-Muslim dialogue initiative called A Common Word, which is led by Jordan's Prince Ghazi.
"The title comes from a verse in the Qur'an which mentions, 'a common word between us and you,' referring to Muslims and the 'people of the Word,' Christians and Jews," says Wallace.
"It's bringing together prominent leaders from the Muslim and Christian worlds. And what's new is that the influential evangelical church community in the U. S. is becoming involved, where they hadn't been before."
Wallace says an emerging focus for international relations and religion study and policy in the coming years will be China.
"We're witnessing this absolute explosion of interest and involvement in religion in China, whether it's Christianity, Buddhism or Islam," notes Wallace.
"The Chinese leadership is encountering a scenario they haven't faced. They are wondering, 'how do we handle this.' "
While he and Barton are happily ensconced in Beantown, Wallace says part of their hearts never left Calgary.
"We come back every year and we still have many friends in both the religious and political worlds," says Wallace.
He's convinced his years in Calgary prepared him to play a role in an important field of academic pursuit.
"Both cities have a real entrepreneurial spirit to them which encourages people to think outside the box," says Wallace. "Calgary is a city that values ideas and intellect. Boston is a huge incubator for new ideas in all kinds of fields."
Richelle Wiseman of the Centre for Faith and the Media says Wallace's topic is timely and relevant for Calgarians.
"Anyone involved in overseas business or non-governmental organizations, not to mention politics, needs to understand the powerful dimension that religion plays in the cultures of many countries," says Wise-man.
"You just have to look at the troubles the Bush administration's foreign policy got into in Iraq by not fully comprehending the differences between the Sunni and Shiite Muslim perspectives."
Tickets for Wallace's March 11 talk, held at the Petroleum Club, are available at info@faithandmedia.org or by phone at 403-278-7357.
gmorton@theherald.canwest.com
*****
February 22, 2009
Op-Ed Columnist
Start Up the Risk-Takers
By THOMAS L. FRIEDMAN
Reading the news that General Motors and Chrysler are now lining up for another $20 billion or so in government aid — on top of the billions they’ve already received or requested — leaves me with the sick feeling that we are subsidizing the losers and for only one reason: because they claim that their funerals would cost more than keeping them on life support. Sorry, friends, but this is not the American way. Bailing out the losers is not how we got rich as a country, and it is not how we’ll get out of this crisis.
G.M. has become a giant wealth- destruction machine — possibly the biggest in history — and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labor agreements and new visions. When it comes to helping companies, precious public money should focus on start-ups, not bailouts.
You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.
If we are going to be spending billions of taxpayer dollars, it can’t only be on office-decorating bankers, over-leveraged home speculators and auto executives who year after year spent more energy resisting changes and lobbying Washington than leading change and beating Toyota.
I’ve been traveling all across the country on a book tour, and every evening I return to my hotel with my pockets full of business cards from inventors in clean energy. Our country is still bursting with innovators looking for capital. So, let’s make sure all the losers clamoring for help don’t drown out the potential winners who could lift us out of this. Some of our best companies, such as Intel, were started in recessions, when necessity makes innovators even more inventive and risk-takers even more daring.
Yes, we have to shore up the banking system, which underpins everything; and finding a fair way to prevent hardworking people, who played by the rules, from losing their homes to foreclosure is both right and essential for stability.
But beyond that, let’s think, talk and plan in more aspirational ways. We’re down, but we’re not out. As we invest taxpayer money, let’s do it with an eye to starting a new generation of biotech, info-tech, nanotech and clean-tech companies, with real innovators, real 21st-century jobs and potentially real profits for taxpayers. Our motto should be, “Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.”
To be fair, the stimulus package that the Obama team and the Democrats in Congress recently passed — with virtually no Republican help — goes some way toward doing just that. Hat’s off for that. Now let’s do more.
The renewable-energy business — wind, solar and solar thermal — was almost dead in this country. Most new projects stopped last fall because they depended for their financing on selling their renewable energy tax credits to Wall Street firms. As those Wall Street firms went bust or suffered steep losses, they had no need for tax credits because they had no profits to offset. The stimulus package created a mechanism for renewable energy innovators to bypass Wall Street and monetize their tax credits directly through the U.S. Treasury, for any project that starts between now and the end of 2010.
The wind and solar industries in America “were dead in the fourth quarter,” said John Woolard, chief executive of BrightSource Energy, which builds and operates cutting-edge solar-thermal plants in the Mojave Desert. Almost five gigawatts of new solar-thermal projects — the equivalent of five big nuclear plants — at various stages of permitting were being held up because of a lack of financing.
“All of these projects will now go ahead,” said Woolard. “You are talking about thousands of jobs ... We really got something right in this legislation.”
These jobs will be in engineering, constructing and operating huge solar systems and wind farms and manufacturing new photovoltaics. Together they will drive innovation in all these areas — and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the “ChinIndia price,” that is the price at which they can scale in China and India.
That is how taxpayer money should be used to stimulate: limited financing, for a limited time, targeted on an industry bristling with new technology start-ups that, with a little push from Uncle Sam, won’t just survive this crisis but help us thrive when it is over. We need, and the world needs, an America that is thriving not just surviving.
February 24, 2009
Op-Ed Columnist
The Big Test
By DAVID BROOKS
“We cannot successfully address any of our problems without addressing all of them.”
Barack Obama, Feb. 21, 2009
When I was a freshman in college, I was assigned “Reflections on the Revolution in France” by Edmund Burke. I loathed the book. Burke argued that each individual’s private stock of reason is small and that political decisions should be guided by the accumulated wisdom of the ages. Change is necessary, Burke continued, but it should be gradual, not disruptive. For a young democratic socialist, hoping to help begin the world anew, this seemed like a reactionary retreat into passivity.
Over the years, I have come to see that Burke had a point. The political history of the 20th century is the history of social-engineering projects executed by well-intentioned people that began well and ended badly. There were big errors like communism, but also lesser ones, like a Vietnam War designed by the best and the brightest, urban renewal efforts that decimated neighborhoods, welfare policies that had the unintended effect of weakening families and development programs that left a string of white elephant projects across the world.
These experiences drove me toward the crooked timber school of public philosophy: Michael Oakeshott, Isaiah Berlin, Edward Banfield, Reinhold Niebuhr, Friedrich Hayek, Clinton Rossiter and George Orwell. These writers — some left, some right — had a sense of epistemological modesty. They knew how little we can know. They understood that we are strangers to ourselves and society is an immeasurably complex organism. They tended to be skeptical of technocratic, rationalist planning and suspicious of schemes to reorganize society from the top down.
Before long, I was no longer a liberal. Liberals are more optimistic about the capacity of individual reason and the government’s ability to execute transformational change. They have more faith in the power of social science, macroeconomic models and 10-point programs.
Readers of this column know that I am a great admirer of Barack Obama and those around him. And yet the gap between my epistemological modesty and their liberal worldviews has been evident over the past few weeks. The people in the administration are surrounded by a galaxy of unknowns, and yet they see this economic crisis as an opportunity to expand their reach, to take bigger risks and, as Obama said on Saturday, to tackle every major problem at once.
President Obama has concentrated enormous power on a few aides in the West Wing of the White House. These aides are unrolling a rapid string of plans: to create three million jobs, to redesign the health care system, to save the auto industry, to revive the housing industry, to reinvent the energy sector, to revitalize the banks, to reform the schools — and to do it all while cutting the deficit in half.
If ever this kind of domestic revolution were possible, this is the time and these are the people to do it. The crisis demands a large response. The people around Obama are smart and sober. Their plans are bold but seem supple and chastened by a realistic sensibility.
Yet they set off my Burkean alarm bells. I fear that in trying to do everything at once, they will do nothing well. I fear that we have a group of people who haven’t even learned to use their new phone system trying to redesign half the U.S. economy. I fear they are going to try to undertake the biggest administrative challenge in American history while refusing to hire the people who can help the most: agency veterans who are registered lobbyists.
I worry that we’re operating far beyond our economic knowledge. Every time the administration releases an initiative, I read 20 different economists with 20 different opinions. I worry that we lack the political structures to regain fiscal control. Deficits are exploding, and the president clearly wants to restrain them. But there’s no evidence that Democrats and Republicans in Congress have the courage or the mutual trust required to share the blame when taxes have to rise and benefits have to be cut.
All in all, I can see why the markets are nervous and dropping. And it’s also clear that we’re on the cusp of the biggest political experiment of our lifetimes. If Obama is mostly successful, then the epistemological skepticism natural to conservatives will have been discredited. We will know that highly trained government experts are capable of quickly designing and executing top-down transformational change. If they mostly fail, then liberalism will suffer a grievous blow, and conservatives will be called upon to restore order and sanity.
It’ll be interesting to see who’s right. But I can’t even root for my own vindication. The costs are too high. I have to go to the keyboard each morning hoping Barack Obama is going to prove me wrong.
Op-Ed Columnist
The Big Test
By DAVID BROOKS
“We cannot successfully address any of our problems without addressing all of them.”
Barack Obama, Feb. 21, 2009
When I was a freshman in college, I was assigned “Reflections on the Revolution in France” by Edmund Burke. I loathed the book. Burke argued that each individual’s private stock of reason is small and that political decisions should be guided by the accumulated wisdom of the ages. Change is necessary, Burke continued, but it should be gradual, not disruptive. For a young democratic socialist, hoping to help begin the world anew, this seemed like a reactionary retreat into passivity.
Over the years, I have come to see that Burke had a point. The political history of the 20th century is the history of social-engineering projects executed by well-intentioned people that began well and ended badly. There were big errors like communism, but also lesser ones, like a Vietnam War designed by the best and the brightest, urban renewal efforts that decimated neighborhoods, welfare policies that had the unintended effect of weakening families and development programs that left a string of white elephant projects across the world.
These experiences drove me toward the crooked timber school of public philosophy: Michael Oakeshott, Isaiah Berlin, Edward Banfield, Reinhold Niebuhr, Friedrich Hayek, Clinton Rossiter and George Orwell. These writers — some left, some right — had a sense of epistemological modesty. They knew how little we can know. They understood that we are strangers to ourselves and society is an immeasurably complex organism. They tended to be skeptical of technocratic, rationalist planning and suspicious of schemes to reorganize society from the top down.
Before long, I was no longer a liberal. Liberals are more optimistic about the capacity of individual reason and the government’s ability to execute transformational change. They have more faith in the power of social science, macroeconomic models and 10-point programs.
Readers of this column know that I am a great admirer of Barack Obama and those around him. And yet the gap between my epistemological modesty and their liberal worldviews has been evident over the past few weeks. The people in the administration are surrounded by a galaxy of unknowns, and yet they see this economic crisis as an opportunity to expand their reach, to take bigger risks and, as Obama said on Saturday, to tackle every major problem at once.
President Obama has concentrated enormous power on a few aides in the West Wing of the White House. These aides are unrolling a rapid string of plans: to create three million jobs, to redesign the health care system, to save the auto industry, to revive the housing industry, to reinvent the energy sector, to revitalize the banks, to reform the schools — and to do it all while cutting the deficit in half.
If ever this kind of domestic revolution were possible, this is the time and these are the people to do it. The crisis demands a large response. The people around Obama are smart and sober. Their plans are bold but seem supple and chastened by a realistic sensibility.
Yet they set off my Burkean alarm bells. I fear that in trying to do everything at once, they will do nothing well. I fear that we have a group of people who haven’t even learned to use their new phone system trying to redesign half the U.S. economy. I fear they are going to try to undertake the biggest administrative challenge in American history while refusing to hire the people who can help the most: agency veterans who are registered lobbyists.
I worry that we’re operating far beyond our economic knowledge. Every time the administration releases an initiative, I read 20 different economists with 20 different opinions. I worry that we lack the political structures to regain fiscal control. Deficits are exploding, and the president clearly wants to restrain them. But there’s no evidence that Democrats and Republicans in Congress have the courage or the mutual trust required to share the blame when taxes have to rise and benefits have to be cut.
All in all, I can see why the markets are nervous and dropping. And it’s also clear that we’re on the cusp of the biggest political experiment of our lifetimes. If Obama is mostly successful, then the epistemological skepticism natural to conservatives will have been discredited. We will know that highly trained government experts are capable of quickly designing and executing top-down transformational change. If they mostly fail, then liberalism will suffer a grievous blow, and conservatives will be called upon to restore order and sanity.
It’ll be interesting to see who’s right. But I can’t even root for my own vindication. The costs are too high. I have to go to the keyboard each morning hoping Barack Obama is going to prove me wrong.
February 25, 2009
Op-Ed Columnist
Paging Uncle Sam
By THOMAS L. FRIEDMAN
Seoul, South Korea
It is very useful to come to Asia to be reminded about America’s standing in the world these days. For all the talk in recent years about America’s inevitable decline, all eyes are not now on Tokyo, Beijing, Brussels or Moscow — nor on any other pretenders to the world heavyweight crown. All eyes are on Washington to pull the world out of its economic tailspin. At no time in the last 50 years have we ever felt weaker, and at no time in the last 50 years has the world ever seen us as more important.
While it is true that since the end of the cold war global leaders and intellectuals often complained about a world of too much American power, one doesn’t hear much of that grumbling today when most people recognize that only an economically revitalized America has the power to prevent the world economy from going into a global depression. It was always easy to complain about a world of too much American power as long as you didn’t have to live in a world of too little American power. And right now, that is the danger: a world of too little American power.
Somewhere in the back of their minds, a lot of people seem to be realizing that the alternative to a U.S.-dominated world is not a world dominated by someone else or someone better. It is a leaderless world. Neither Russia nor China has the will or the way to provide the global public goods that America — at its best — consistently has. The European Union right now is so split that it cannot even agree on an effective stimulus package.
No wonder then that even though this economic crisis began in America, with American bad borrowing and bad lending practices, people have nevertheless fled to the U.S. dollar. Case in point: South Korea’s currency has lost roughly 40 percent against the dollar in just the last six months.
“No other country can substitute for the U.S.,” a senior Korean official remarked to me. “The U.S. is still No. 1 in military, No. 1 in economy, No. 1 in promoting human rights and No. 1 in idealism. Only the U.S. can lead the world. No other country can. China can’t. The E.U. is too divided, and Europe is militarily far behind the U.S. So it is only the United States ... We have never had a more unipolar world than we have today.”
Yes, many Asians resent the fact that Americans scolded them about their banking crisis in the 1990s, and now we’ve made many of the same mistakes. But that schadenfreude doesn’t last long. In random conversations here in Seoul with Korean and Asian thinkers, journalists and business executives, I found people really worried: Could it be, they ask, that the Americans don’t know what they are doing, or, worse, that they know what they are doing but the problem is just so much bigger than anything we’ve ever seen?
This is a region where Western brands carry great weight, and for people to see giant U.S. financial brands like Citigroup and A.I.G. teetering is deeply unnerving.
The big trading nations, like South Korea, are particularly nervous that America will succumb to economic protectionism, which would undermine the global trading system.
“There is no one who can replace America. Without American leadership, there is no leadership,” said Lee Hong-koo, South Korea’s former ambassador to Washington. “That puts a tremendous burden on the American people to do something positive. You can’t be tempted by the usual nationalism. When things don’t go well, most people become nationalistic. And in the economic world, that is protectionism ... We are pleased to see President Obama is not doing that. Americans, as a people, should realize how many hopes and expectations other people are putting on their shoulders.”
And that’s just on economics. President Obama’s first big security test could come here — and soon. North Korea has gotten crazier than ever; it has been made even poorer by the global economic crisis and by the withdrawal of aid by the new South Korean government. Now the North is threatening to test one of its Taepodong-2 long-range missiles, which may have the capacity to hit Hawaii, Alaska or beyond.
The North last tried such a test in 2006, but the rocket exploded 40 seconds after its launch. If the North does test such an intercontinental ballistic missile again, American forces will have to consider blowing it up on the launch pad or shooting it out of the sky. We never should have allowed the North to get a nuclear warhead; we certainly don’t want it testing a long-range missile that could deliver that nuclear warhead to our shores, or anywhere else.
Never more inward-looking, never more in demand: that’s America today. This moment recalls a point raised by the Johns Hopkins University foreign policy expert Michael Mandelbaum in his book, “The Case for Goliath.” When it comes to the way other countries view America’s pre-eminent role in the world, he wrote, “whatever its life span, three things can be safely predicted: they will not pay for it; they will continue to criticize it; and they will miss it when it is gone.”
Op-Ed Columnist
Paging Uncle Sam
By THOMAS L. FRIEDMAN
Seoul, South Korea
It is very useful to come to Asia to be reminded about America’s standing in the world these days. For all the talk in recent years about America’s inevitable decline, all eyes are not now on Tokyo, Beijing, Brussels or Moscow — nor on any other pretenders to the world heavyweight crown. All eyes are on Washington to pull the world out of its economic tailspin. At no time in the last 50 years have we ever felt weaker, and at no time in the last 50 years has the world ever seen us as more important.
While it is true that since the end of the cold war global leaders and intellectuals often complained about a world of too much American power, one doesn’t hear much of that grumbling today when most people recognize that only an economically revitalized America has the power to prevent the world economy from going into a global depression. It was always easy to complain about a world of too much American power as long as you didn’t have to live in a world of too little American power. And right now, that is the danger: a world of too little American power.
Somewhere in the back of their minds, a lot of people seem to be realizing that the alternative to a U.S.-dominated world is not a world dominated by someone else or someone better. It is a leaderless world. Neither Russia nor China has the will or the way to provide the global public goods that America — at its best — consistently has. The European Union right now is so split that it cannot even agree on an effective stimulus package.
No wonder then that even though this economic crisis began in America, with American bad borrowing and bad lending practices, people have nevertheless fled to the U.S. dollar. Case in point: South Korea’s currency has lost roughly 40 percent against the dollar in just the last six months.
“No other country can substitute for the U.S.,” a senior Korean official remarked to me. “The U.S. is still No. 1 in military, No. 1 in economy, No. 1 in promoting human rights and No. 1 in idealism. Only the U.S. can lead the world. No other country can. China can’t. The E.U. is too divided, and Europe is militarily far behind the U.S. So it is only the United States ... We have never had a more unipolar world than we have today.”
Yes, many Asians resent the fact that Americans scolded them about their banking crisis in the 1990s, and now we’ve made many of the same mistakes. But that schadenfreude doesn’t last long. In random conversations here in Seoul with Korean and Asian thinkers, journalists and business executives, I found people really worried: Could it be, they ask, that the Americans don’t know what they are doing, or, worse, that they know what they are doing but the problem is just so much bigger than anything we’ve ever seen?
This is a region where Western brands carry great weight, and for people to see giant U.S. financial brands like Citigroup and A.I.G. teetering is deeply unnerving.
The big trading nations, like South Korea, are particularly nervous that America will succumb to economic protectionism, which would undermine the global trading system.
“There is no one who can replace America. Without American leadership, there is no leadership,” said Lee Hong-koo, South Korea’s former ambassador to Washington. “That puts a tremendous burden on the American people to do something positive. You can’t be tempted by the usual nationalism. When things don’t go well, most people become nationalistic. And in the economic world, that is protectionism ... We are pleased to see President Obama is not doing that. Americans, as a people, should realize how many hopes and expectations other people are putting on their shoulders.”
And that’s just on economics. President Obama’s first big security test could come here — and soon. North Korea has gotten crazier than ever; it has been made even poorer by the global economic crisis and by the withdrawal of aid by the new South Korean government. Now the North is threatening to test one of its Taepodong-2 long-range missiles, which may have the capacity to hit Hawaii, Alaska or beyond.
The North last tried such a test in 2006, but the rocket exploded 40 seconds after its launch. If the North does test such an intercontinental ballistic missile again, American forces will have to consider blowing it up on the launch pad or shooting it out of the sky. We never should have allowed the North to get a nuclear warhead; we certainly don’t want it testing a long-range missile that could deliver that nuclear warhead to our shores, or anywhere else.
Never more inward-looking, never more in demand: that’s America today. This moment recalls a point raised by the Johns Hopkins University foreign policy expert Michael Mandelbaum in his book, “The Case for Goliath.” When it comes to the way other countries view America’s pre-eminent role in the world, he wrote, “whatever its life span, three things can be safely predicted: they will not pay for it; they will continue to criticize it; and they will miss it when it is gone.”
March 2, 2009
Op-Ed Contributor
Japan’s Crisis of the Mind
By MASARU TAMAMOTO
Yokohama, Japan
RECENT events mark Japan’s return to the world’s stage, or at least so it seems. Tokyo was Secretary of State Hillary Clinton’s inaugural overseas destination. Last week, Prime Minister Taro Aso was the first foreign leader to visit the Obama White House. All this suggests that Washington sees Japan, the world’s second-largest economy, as a powerful nation. If only we saw ourselves the same way.
The truth is, Japan is a mess. Mr. Aso’s approval rate recently hit 11 percent, and his ruling Liberal Democratic Party is in open disarray. His predecessor barely lasted a year. The opposition Democratic Party of Japan just offers more of the same. This is largely because we have become a nation of bureaucrats. What passes for national policy is the sum of various ministerial interests, often conflicting or redundant, with jealously guarded turfs and budgets.
There can be no justification for all those mostly unused airports. Or for roads that lead nowhere. Or for the finance minister who appeared to be drunk at the Group of 7 meeting this month in Rome. Our problem is so deep that it sometimes seems that no political party can tame the bureaucracy and put in place a coherent national agenda.
But what most people don’t recognize is that our crisis is not political, but psychological. After our aggression — and subsequent defeat — in World War II, safety and predictability became society’s goals. Bureaucrats rose to control the details of everyday life. We became a nation with lifetime employment, a corporate system based on stable cross-holdings of shares, and a large middle-class population in which people are equal and alike.
Conservative pundits here like to speak of this equality and sameness as being cornerstones of “Japanese” tradition. Nonsense. Throughout much of its history, Japan has had social stratification and great inequality of wealth and privilege. The “egalitarian” Japan was a creature of the 1970s, with its progressive taxation, redistribution of wealth, subsidies and the dampening of competition through regulation. This all seemed to work just fine until our asset-price bubble popped in the 1990s. Today, the hemmed-in Japanese seem satisfied with the knowledge that everyone around them is equally unhappy.
Since the middle of the 19th century, our economic success has relied on the availability of outside models from which to choose. Our model for social security took inspiration from Bismarck’s Germany, state planning from the Soviet Union, public works from the Tennessee Valley Authority, automobile assembly and manufacturing from Ford. Much of Japanese innovation has involved perfecting what others have created. Sony is famous for its Walkman, but it didn’t invent the tape recorder. Japan’s rise to economic greatness was basically a game of catch-up with the advanced West.
So what happened once we caught up? Over the past two decades, the answer has largely been paralysis. Japan’s ability to imitate outside models was mistaken for progress. But if progress is defined by pursuing a vision of a desirable future, then the Japanese never progressed. What we had was a concept of order and placement, which is essentially stasis.
In the West, on the other hand, the idea of progress rests on establishing individual autonomy and liberty. In Japan, bureaucratic rule offered security and predictability — in exchange for personal freedom. The problem is that our current political leaders can’t keep their side of the bargain. Employment security can no longer be guaranteed. The national pension and health plans seem to be insolvent in the long run. People feel both insecure and unfree.
Signs of despair are everywhere. Japan has one of the highest suicide rates among rich countries. There may be as many as one million “hikikomori,” from teenagers to those in their 40s, who shut themselves in their rooms for years on end. Then there are all those “parasite singles” — or unmarried adults living with their parents. But by far our most serious problem is a declining and aging population. Given present trends, total population will likely decline from around 130 million to under 90 million in 50 years or so. By that same time, 40 percent of Japanese could be over 65.
If we want to survive as a nation, we must shed our deeply rooted resistance to immigration. Contrary to widespread prejudices in favor of keeping Japan “pure,” we desperately need to dilute our blood. Our aging nation will need millions of university-educated middle-class immigrants with high productivity, people who will put down roots and raise families, whose pride and success will be the affirmation of new Japanese values.
Japan desperately needs change, and this will require risk. Risk-taking is not common among the bureaucratically controlled. You won’t find many signs on Japanese beaches saying, “Swim at your own risk. No lifeguard on duty.” If that sign were to appear, many Japanese would likely ask the authorities to tell them if it is safe to swim. This same risk aversion translates into protectionism and insularity. The ministry of agriculture, for example, wants to increase self-sufficiency in food. There is not nearly enough critical thinking and dissent in the Japanese news media.
Still, the idea that the Japanese are afraid of risk has no basis in history, for better or for worse. Remember Pearl Harbor? In fact, Japan’s passiveness today is in large measure a calculated and reasonable reaction to its behavior during the Second World War. But today, this emphasis on safety and security is long past its sell-by date.
We have run out of outside models to imitate. We must start from scratch, embracing an idea of progress that is based on innovation, ambition and dynamism. Doing so will take risk — and extraordinary leadership. But the alternative is to continue stumbling down a path of decline.
Masaru Tamamoto is a senior fellow at the World Policy Institute.
Op-Ed Contributor
Japan’s Crisis of the Mind
By MASARU TAMAMOTO
Yokohama, Japan
RECENT events mark Japan’s return to the world’s stage, or at least so it seems. Tokyo was Secretary of State Hillary Clinton’s inaugural overseas destination. Last week, Prime Minister Taro Aso was the first foreign leader to visit the Obama White House. All this suggests that Washington sees Japan, the world’s second-largest economy, as a powerful nation. If only we saw ourselves the same way.
The truth is, Japan is a mess. Mr. Aso’s approval rate recently hit 11 percent, and his ruling Liberal Democratic Party is in open disarray. His predecessor barely lasted a year. The opposition Democratic Party of Japan just offers more of the same. This is largely because we have become a nation of bureaucrats. What passes for national policy is the sum of various ministerial interests, often conflicting or redundant, with jealously guarded turfs and budgets.
There can be no justification for all those mostly unused airports. Or for roads that lead nowhere. Or for the finance minister who appeared to be drunk at the Group of 7 meeting this month in Rome. Our problem is so deep that it sometimes seems that no political party can tame the bureaucracy and put in place a coherent national agenda.
But what most people don’t recognize is that our crisis is not political, but psychological. After our aggression — and subsequent defeat — in World War II, safety and predictability became society’s goals. Bureaucrats rose to control the details of everyday life. We became a nation with lifetime employment, a corporate system based on stable cross-holdings of shares, and a large middle-class population in which people are equal and alike.
Conservative pundits here like to speak of this equality and sameness as being cornerstones of “Japanese” tradition. Nonsense. Throughout much of its history, Japan has had social stratification and great inequality of wealth and privilege. The “egalitarian” Japan was a creature of the 1970s, with its progressive taxation, redistribution of wealth, subsidies and the dampening of competition through regulation. This all seemed to work just fine until our asset-price bubble popped in the 1990s. Today, the hemmed-in Japanese seem satisfied with the knowledge that everyone around them is equally unhappy.
Since the middle of the 19th century, our economic success has relied on the availability of outside models from which to choose. Our model for social security took inspiration from Bismarck’s Germany, state planning from the Soviet Union, public works from the Tennessee Valley Authority, automobile assembly and manufacturing from Ford. Much of Japanese innovation has involved perfecting what others have created. Sony is famous for its Walkman, but it didn’t invent the tape recorder. Japan’s rise to economic greatness was basically a game of catch-up with the advanced West.
So what happened once we caught up? Over the past two decades, the answer has largely been paralysis. Japan’s ability to imitate outside models was mistaken for progress. But if progress is defined by pursuing a vision of a desirable future, then the Japanese never progressed. What we had was a concept of order and placement, which is essentially stasis.
In the West, on the other hand, the idea of progress rests on establishing individual autonomy and liberty. In Japan, bureaucratic rule offered security and predictability — in exchange for personal freedom. The problem is that our current political leaders can’t keep their side of the bargain. Employment security can no longer be guaranteed. The national pension and health plans seem to be insolvent in the long run. People feel both insecure and unfree.
Signs of despair are everywhere. Japan has one of the highest suicide rates among rich countries. There may be as many as one million “hikikomori,” from teenagers to those in their 40s, who shut themselves in their rooms for years on end. Then there are all those “parasite singles” — or unmarried adults living with their parents. But by far our most serious problem is a declining and aging population. Given present trends, total population will likely decline from around 130 million to under 90 million in 50 years or so. By that same time, 40 percent of Japanese could be over 65.
If we want to survive as a nation, we must shed our deeply rooted resistance to immigration. Contrary to widespread prejudices in favor of keeping Japan “pure,” we desperately need to dilute our blood. Our aging nation will need millions of university-educated middle-class immigrants with high productivity, people who will put down roots and raise families, whose pride and success will be the affirmation of new Japanese values.
Japan desperately needs change, and this will require risk. Risk-taking is not common among the bureaucratically controlled. You won’t find many signs on Japanese beaches saying, “Swim at your own risk. No lifeguard on duty.” If that sign were to appear, many Japanese would likely ask the authorities to tell them if it is safe to swim. This same risk aversion translates into protectionism and insularity. The ministry of agriculture, for example, wants to increase self-sufficiency in food. There is not nearly enough critical thinking and dissent in the Japanese news media.
Still, the idea that the Japanese are afraid of risk has no basis in history, for better or for worse. Remember Pearl Harbor? In fact, Japan’s passiveness today is in large measure a calculated and reasonable reaction to its behavior during the Second World War. But today, this emphasis on safety and security is long past its sell-by date.
We have run out of outside models to imitate. We must start from scratch, embracing an idea of progress that is based on innovation, ambition and dynamism. Doing so will take risk — and extraordinary leadership. But the alternative is to continue stumbling down a path of decline.
Masaru Tamamoto is a senior fellow at the World Policy Institute.
March 8, 2009
Op-Ed Columnist
The Inflection Is Near?
By THOMAS L. FRIEDMAN
Sometimes the satirical newspaper The Onion is so right on, I can’t resist quoting from it. Consider this faux article from June 2005 about America’s addiction to Chinese exports:
FENGHUA, China — Chen Hsien, an employee of Fenghua Ningbo Plastic Works Ltd., a plastics factory that manufactures lightweight household items for Western markets, expressed his disbelief Monday over the “sheer amount of [garbage] Americans will buy. Often, when we’re assigned a new order for, say, ‘salad shooters,’ I will say to myself, ‘There’s no way that anyone will ever buy these.’ ... One month later, we will receive an order for the same product, but three times the quantity. How can anyone have a need for such useless [garbage]? I hear that Americans can buy anything they want, and I believe it, judging from the things I’ve made for them,” Chen said. “And I also hear that, when they no longer want an item, they simply throw it away. So wasteful and contemptible.”
Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”
We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...
We can’t do this anymore.
“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.
“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate ...’ Real wealth is something you can pass on in a way that others can enjoy.”
Over a billion people today suffer from water scarcity; deforestation in the tropics destroys an area the size of Greece every year — more than 25 million acres; more than half of the world’s fisheries are over-fished or fished at their limit.
“Just as a few lonely economists warned us we were living beyond our financial means and overdrawing our financial assets, scientists are warning us that we’re living beyond our ecological means and overdrawing our natural assets,” argues Glenn Prickett, senior vice president at Conservation International. But, he cautioned, as environmentalists have pointed out: “Mother Nature doesn’t do bailouts.”
One of those who has been warning me of this for a long time is Paul Gilding, the Australian environmental business expert. He has a name for this moment — when both Mother Nature and Father Greed have hit the wall at once — “The Great Disruption.”
“We are taking a system operating past its capacity and driving it faster and harder,” he wrote me. “No matter how wonderful the system is, the laws of physics and biology still apply.” We must have growth, but we must grow in a different way. For starters, economies need to transition to the concept of net-zero, whereby buildings, cars, factories and homes are designed not only to generate as much energy as they use but to be infinitely recyclable in as many parts as possible. Let’s grow by creating flows rather than plundering more stocks.
Gilding says he’s actually an optimist. So am I. People are already using this economic slowdown to retool and reorient economies. Germany, Britain, China and the U.S. have all used stimulus bills to make huge new investments in clean power. South Korea’s new national paradigm for development is called: “Low carbon, green growth.” Who knew? People are realizing we need more than incremental changes — and we’re seeing the first stirrings of growth in smarter, more efficient, more responsible ways.
In the meantime, says Gilding, take notes: “When we look back, 2008 will be a momentous year in human history. Our children and grandchildren will ask us, ‘What was it like? What were you doing when it started to fall apart? What did you think? What did you do?’ ” Often in the middle of something momentous, we can’t see its significance. But for me there is no doubt: 2008 will be the marker — the year when ‘The Great Disruption’ began.
Op-Ed Columnist
The Inflection Is Near?
By THOMAS L. FRIEDMAN
Sometimes the satirical newspaper The Onion is so right on, I can’t resist quoting from it. Consider this faux article from June 2005 about America’s addiction to Chinese exports:
FENGHUA, China — Chen Hsien, an employee of Fenghua Ningbo Plastic Works Ltd., a plastics factory that manufactures lightweight household items for Western markets, expressed his disbelief Monday over the “sheer amount of [garbage] Americans will buy. Often, when we’re assigned a new order for, say, ‘salad shooters,’ I will say to myself, ‘There’s no way that anyone will ever buy these.’ ... One month later, we will receive an order for the same product, but three times the quantity. How can anyone have a need for such useless [garbage]? I hear that Americans can buy anything they want, and I believe it, judging from the things I’ve made for them,” Chen said. “And I also hear that, when they no longer want an item, they simply throw it away. So wasteful and contemptible.”
Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”
We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...
We can’t do this anymore.
“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.
“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate ...’ Real wealth is something you can pass on in a way that others can enjoy.”
Over a billion people today suffer from water scarcity; deforestation in the tropics destroys an area the size of Greece every year — more than 25 million acres; more than half of the world’s fisheries are over-fished or fished at their limit.
“Just as a few lonely economists warned us we were living beyond our financial means and overdrawing our financial assets, scientists are warning us that we’re living beyond our ecological means and overdrawing our natural assets,” argues Glenn Prickett, senior vice president at Conservation International. But, he cautioned, as environmentalists have pointed out: “Mother Nature doesn’t do bailouts.”
One of those who has been warning me of this for a long time is Paul Gilding, the Australian environmental business expert. He has a name for this moment — when both Mother Nature and Father Greed have hit the wall at once — “The Great Disruption.”
“We are taking a system operating past its capacity and driving it faster and harder,” he wrote me. “No matter how wonderful the system is, the laws of physics and biology still apply.” We must have growth, but we must grow in a different way. For starters, economies need to transition to the concept of net-zero, whereby buildings, cars, factories and homes are designed not only to generate as much energy as they use but to be infinitely recyclable in as many parts as possible. Let’s grow by creating flows rather than plundering more stocks.
Gilding says he’s actually an optimist. So am I. People are already using this economic slowdown to retool and reorient economies. Germany, Britain, China and the U.S. have all used stimulus bills to make huge new investments in clean power. South Korea’s new national paradigm for development is called: “Low carbon, green growth.” Who knew? People are realizing we need more than incremental changes — and we’re seeing the first stirrings of growth in smarter, more efficient, more responsible ways.
In the meantime, says Gilding, take notes: “When we look back, 2008 will be a momentous year in human history. Our children and grandchildren will ask us, ‘What was it like? What were you doing when it started to fall apart? What did you think? What did you do?’ ” Often in the middle of something momentous, we can’t see its significance. But for me there is no doubt: 2008 will be the marker — the year when ‘The Great Disruption’ began.
March 24, 2009
Op-Ed Columnist
Combat and Community
By DAVID BROOKS
Wardak Province, Afghanistan
You drive up to the forward operating base in Wardak Province in an armored Humvee, with the machine-gunner sticking up through the roof and his butt swinging on a little perch just by your head. Outside there’s a scraggly downtown, with ragamuffin Afghan children, almost no old people (the median life expectancy is 45) and dust everywhere. The dust of Afghanistan piles up in front of the storefronts and covers the ruins of the buildings destroyed during the Soviet period, or during the civil war or during some lost conflict from centuries past.
The Humvee takes the serpentine path through the checkpoint and you pass a double line of soldiers heading out on foot patrol. There’s a soldier that looks from a distance like a child in gear, but it turns out to be a tiny American woman smiling under her armor, pack and rifle, and you think that of all the great powers who’ve humped their way over these mountains, not another one sent out warriors as unlikely or effective as these.
After the checkpoint, there’s a parking lot with great lines of heavy vehicles. For years, the coalition forces fought this war on the cheap, but that’s changing. The U.S. has just increased troop levels tenfold in Wardak. The parking lots are bursting with hulking machinery, the avalanche of metal America brings to a war it takes seriously.
There’s a line of porta-potties and you’re brought into a plywood room. There are about 25 Army Rangers inside, linebacker types with crew cuts, except for a special-ops guy, Major Moses, who is dark-skinned with a thick beard. These men have been through Iraq, and they now have the habits of counterinsurgency warfare deep in their bones in a way they didn’t just a few years ago.
As they talk, it becomes clear that aside from killing bad guys, they’re also trying to figure out how to reweave Afghan society.
Before the Soviet invasion in 1979, Afghan towns had three parallel authority structures: the tribal elders, the religious clerics and the government representatives. The Soviets decimated the tribes and the indigenous government. That left only the mullahs, and their sudden unchecked prominence helped explain the rise of the Taliban.
The terror and the fall of the Taliban reduced clerical authority, too. By 2002, when the coalition forces arrived, village society was fractured, social capital decimated. The resulting disorder has been a perfect nesting ground for the insurgents. The insurgents are not popular in Afghanistan, the way they sometimes were in Iraq. But they have money, and young men in the villages talk about “taking a Taliban day” — that is, accepting a few hundred bucks to plant an I.E.D.
Between 2002 and 2005, the coalition and the Afghans were slow to recognize the perils of social fragmentation. The general view was that warlordism and civil war were the biggest threats. Therefore, power should be centralized with the national government. The country should be restored through a strong national government spreading outward.
That approach has had some success. The Afghan National Army is the country’s most trusted institution. But it’s also had many shortcomings. The national police force is ineffective. The central government has rarely been able to reweave the social fabric at the village level. Nobody’s been able to establish rule of law or end rampant corruption.
So the Afghans and the coalition are adapting. There’s been a shift to supplement central authorities with village authority structures. Under the National Solidarity Project, villages elect Community Development Councils. Western aid agencies give the councils up to $60,000 to do local projects, but it’s not the projects that matter most. It’s the creation of formal community structures. These projects are up and running in 23,000 villages.
Mohammad Halim Fidai, the governor of Wardak Province, and the guys in the plywood room are creating the Afghan Public Protection Program. Under it, villages would no longer depend solely on the national police sent from Kabul. Local committees would hire their own constabulary to guard schools, bridges and neighborhoods. Alongside just 26 national policemen in the area, there will be 250 local men from the A.P.P.P.
The program is controversial. Many feel it will lead to a return to local militias and warlordism. But if Afghanistan is to stabilize, there have to be local authority structures. The culture of conversation and consensus has to be formalized in institutions. These local structures have to be connected upward to the central state. And that’s beginning to happen amidst the armored Humvees and the daily threat of death.
When you put more boots on the ground, you not only augment your army’s firing power, you give it the capacity to experiment. A few years ago, the good guys had only vague ideas about how to win this war. Now they’re much smarter.
Bob Herbert is off today.
http://www.nytimes.com/2009/03/24/opini ... nted=print
Op-Ed Columnist
Combat and Community
By DAVID BROOKS
Wardak Province, Afghanistan
You drive up to the forward operating base in Wardak Province in an armored Humvee, with the machine-gunner sticking up through the roof and his butt swinging on a little perch just by your head. Outside there’s a scraggly downtown, with ragamuffin Afghan children, almost no old people (the median life expectancy is 45) and dust everywhere. The dust of Afghanistan piles up in front of the storefronts and covers the ruins of the buildings destroyed during the Soviet period, or during the civil war or during some lost conflict from centuries past.
The Humvee takes the serpentine path through the checkpoint and you pass a double line of soldiers heading out on foot patrol. There’s a soldier that looks from a distance like a child in gear, but it turns out to be a tiny American woman smiling under her armor, pack and rifle, and you think that of all the great powers who’ve humped their way over these mountains, not another one sent out warriors as unlikely or effective as these.
After the checkpoint, there’s a parking lot with great lines of heavy vehicles. For years, the coalition forces fought this war on the cheap, but that’s changing. The U.S. has just increased troop levels tenfold in Wardak. The parking lots are bursting with hulking machinery, the avalanche of metal America brings to a war it takes seriously.
There’s a line of porta-potties and you’re brought into a plywood room. There are about 25 Army Rangers inside, linebacker types with crew cuts, except for a special-ops guy, Major Moses, who is dark-skinned with a thick beard. These men have been through Iraq, and they now have the habits of counterinsurgency warfare deep in their bones in a way they didn’t just a few years ago.
As they talk, it becomes clear that aside from killing bad guys, they’re also trying to figure out how to reweave Afghan society.
Before the Soviet invasion in 1979, Afghan towns had three parallel authority structures: the tribal elders, the religious clerics and the government representatives. The Soviets decimated the tribes and the indigenous government. That left only the mullahs, and their sudden unchecked prominence helped explain the rise of the Taliban.
The terror and the fall of the Taliban reduced clerical authority, too. By 2002, when the coalition forces arrived, village society was fractured, social capital decimated. The resulting disorder has been a perfect nesting ground for the insurgents. The insurgents are not popular in Afghanistan, the way they sometimes were in Iraq. But they have money, and young men in the villages talk about “taking a Taliban day” — that is, accepting a few hundred bucks to plant an I.E.D.
Between 2002 and 2005, the coalition and the Afghans were slow to recognize the perils of social fragmentation. The general view was that warlordism and civil war were the biggest threats. Therefore, power should be centralized with the national government. The country should be restored through a strong national government spreading outward.
That approach has had some success. The Afghan National Army is the country’s most trusted institution. But it’s also had many shortcomings. The national police force is ineffective. The central government has rarely been able to reweave the social fabric at the village level. Nobody’s been able to establish rule of law or end rampant corruption.
So the Afghans and the coalition are adapting. There’s been a shift to supplement central authorities with village authority structures. Under the National Solidarity Project, villages elect Community Development Councils. Western aid agencies give the councils up to $60,000 to do local projects, but it’s not the projects that matter most. It’s the creation of formal community structures. These projects are up and running in 23,000 villages.
Mohammad Halim Fidai, the governor of Wardak Province, and the guys in the plywood room are creating the Afghan Public Protection Program. Under it, villages would no longer depend solely on the national police sent from Kabul. Local committees would hire their own constabulary to guard schools, bridges and neighborhoods. Alongside just 26 national policemen in the area, there will be 250 local men from the A.P.P.P.
The program is controversial. Many feel it will lead to a return to local militias and warlordism. But if Afghanistan is to stabilize, there have to be local authority structures. The culture of conversation and consensus has to be formalized in institutions. These local structures have to be connected upward to the central state. And that’s beginning to happen amidst the armored Humvees and the daily threat of death.
When you put more boots on the ground, you not only augment your army’s firing power, you give it the capacity to experiment. A few years ago, the good guys had only vague ideas about how to win this war. Now they’re much smarter.
Bob Herbert is off today.
http://www.nytimes.com/2009/03/24/opini ... nted=print
March 25, 2009
Op-Ed Columnist
Secrets of a Pollster
By THOMAS L. FRIEDMAN
Stan Greenberg, one of America’s most experienced pollsters, sums up the key lesson he learned polling for Bill Clinton, Nelson Mandela, Ehud Barak and Tony Blair: “Bold leaders in tumultuous times always have at least one crash.”
They never come out of the box and deliver the scale of progress and change they promise — not because they are cynical, but because events conspire against them and they encounter competing power centers. What distinguishes the best leaders, he says, is that they learn from their crashes, adjust, persist and succeed.
President Obama has hardly crashed. He’s just getting started. And many, many people — at home and abroad — are rooting for him to succeed. But he definitely is navigating tumultuous times. So when Greenberg called to share the lessons from his new book, “Dispatches from the War Room” — an insider’s account about how the world leaders for whom he polled handled their crashes — I thought: “Those insights might be very useful right now.”
Greenberg kicks off with Bill Clinton. One of his most vivid memories was trying to judge how voters would react to Clinton breaking his oft-stated promise to cut middle-class taxes, right after his 1992 election. They held focus groups in New Jersey. What struck him most, said Greenberg, was that these voters “just didn’t believe any politician would cut their taxes.” That wasn’t how they were judging Clinton.
“They didn’t care about his specific promises,” said Greenberg. “They wanted the new president to act in the long-term economic interests of the country. They wanted to make sure everyone was part of the solution, not like in Reagan’s years when the wealthy didn’t pay their fair share. And they wanted to know that the president wouldn’t lose his instinct to look out for ordinary people.”
Lesson: “Don’t be too literal about campaign promises,” said Greenberg. “There is a lot of scope for governing, if the people think you’re acting in the country’s long-term interests and that you’re working for them.”
Tony Blair crashed over New Labor’s core identity as a party. Labor had been out of power for 18 years. It got back in thanks to Blair’s ability to assure voters that they could trust Labor to be fiscally prudent and, simultaneously, to upgrade Britain’s decrepit government hospitals and schools.
In truth, Blair had to do these serially — first fix the economy and then the hospitals and schools. But he implied that he would do them simultaneously. When, three years into his term, the lack of new investment became obvious — crystallized by the story of a cancer patient who could not get a surgery scheduled and by the time she did the cancer had become inoperable — Blair crashed on the issue of trust. “Blair and New Labor were forever associated after that with being more spin than real,” said Greenberg.
Lesson: Be honest with the public early on when facing huge challenges. They will let you off the hook on a literal campaign promise — if you level with them early about the difficulties and how long it will take to see progress.
Ehud Barak became the prime minister of Israel in 1999, and a pillar of his campaign was that Jerusalem must remain Israel’s eternal, undivided capital. Yet, at Camp David with President Clinton in 2000, Barak offered the Palestinians a division of Jerusalem. What was most striking, said Greenberg, was how readily the Israeli public accepted that shift.
“A position that six months earlier was completely off the table — dividing Jerusalem — was now on it,” said Greenberg. Once the taboo against even hinting at dividing Jerusalem was broken, even Likud voters polled by Greenberg started asking: “Why should we want to keep these Palestinian neighborhoods?” Conventional wisdom just fell apart under the logic of it.
Lesson: “Nothing,” said Greenberg, “is off the table for a leader who wants to make a bold move” in the fundamental interest of the country.
Finally, Nelson Mandela. Four years after he became South Africa’s president in 1994, “people were demoralized about the lack of change and felt that the African National Congress had betrayed its promise,” said Greenberg. “It had failed to deliver housing and jobs, but had delivered a lot of corruption and was at risk of losing its moral authority.”
That was hard for liberation movement leaders to swallow, but the humble citizens wanted their now remote leaders to acknowledge their plight. Lesson: Mandela was humble enough to say that we haven’t brought enough change — that even he was disappointed — without threatening the ANC’s claim to govern. “He began to tell a compelling story that explained why advances were slow, pointed to areas of progress and allowed people to be hopeful about future changes,” said Greenberg.
The über-lesson for presidents? You can’t be too honest in describing big problems, too bold in offering big solutions, too humble in dealing with big missteps, too forward in re-telling your story or too gutsy in speaking the previously unspeakable.
http://www.nytimes.com/2009/03/25/opini ... nted=print
Op-Ed Columnist
Secrets of a Pollster
By THOMAS L. FRIEDMAN
Stan Greenberg, one of America’s most experienced pollsters, sums up the key lesson he learned polling for Bill Clinton, Nelson Mandela, Ehud Barak and Tony Blair: “Bold leaders in tumultuous times always have at least one crash.”
They never come out of the box and deliver the scale of progress and change they promise — not because they are cynical, but because events conspire against them and they encounter competing power centers. What distinguishes the best leaders, he says, is that they learn from their crashes, adjust, persist and succeed.
President Obama has hardly crashed. He’s just getting started. And many, many people — at home and abroad — are rooting for him to succeed. But he definitely is navigating tumultuous times. So when Greenberg called to share the lessons from his new book, “Dispatches from the War Room” — an insider’s account about how the world leaders for whom he polled handled their crashes — I thought: “Those insights might be very useful right now.”
Greenberg kicks off with Bill Clinton. One of his most vivid memories was trying to judge how voters would react to Clinton breaking his oft-stated promise to cut middle-class taxes, right after his 1992 election. They held focus groups in New Jersey. What struck him most, said Greenberg, was that these voters “just didn’t believe any politician would cut their taxes.” That wasn’t how they were judging Clinton.
“They didn’t care about his specific promises,” said Greenberg. “They wanted the new president to act in the long-term economic interests of the country. They wanted to make sure everyone was part of the solution, not like in Reagan’s years when the wealthy didn’t pay their fair share. And they wanted to know that the president wouldn’t lose his instinct to look out for ordinary people.”
Lesson: “Don’t be too literal about campaign promises,” said Greenberg. “There is a lot of scope for governing, if the people think you’re acting in the country’s long-term interests and that you’re working for them.”
Tony Blair crashed over New Labor’s core identity as a party. Labor had been out of power for 18 years. It got back in thanks to Blair’s ability to assure voters that they could trust Labor to be fiscally prudent and, simultaneously, to upgrade Britain’s decrepit government hospitals and schools.
In truth, Blair had to do these serially — first fix the economy and then the hospitals and schools. But he implied that he would do them simultaneously. When, three years into his term, the lack of new investment became obvious — crystallized by the story of a cancer patient who could not get a surgery scheduled and by the time she did the cancer had become inoperable — Blair crashed on the issue of trust. “Blair and New Labor were forever associated after that with being more spin than real,” said Greenberg.
Lesson: Be honest with the public early on when facing huge challenges. They will let you off the hook on a literal campaign promise — if you level with them early about the difficulties and how long it will take to see progress.
Ehud Barak became the prime minister of Israel in 1999, and a pillar of his campaign was that Jerusalem must remain Israel’s eternal, undivided capital. Yet, at Camp David with President Clinton in 2000, Barak offered the Palestinians a division of Jerusalem. What was most striking, said Greenberg, was how readily the Israeli public accepted that shift.
“A position that six months earlier was completely off the table — dividing Jerusalem — was now on it,” said Greenberg. Once the taboo against even hinting at dividing Jerusalem was broken, even Likud voters polled by Greenberg started asking: “Why should we want to keep these Palestinian neighborhoods?” Conventional wisdom just fell apart under the logic of it.
Lesson: “Nothing,” said Greenberg, “is off the table for a leader who wants to make a bold move” in the fundamental interest of the country.
Finally, Nelson Mandela. Four years after he became South Africa’s president in 1994, “people were demoralized about the lack of change and felt that the African National Congress had betrayed its promise,” said Greenberg. “It had failed to deliver housing and jobs, but had delivered a lot of corruption and was at risk of losing its moral authority.”
That was hard for liberation movement leaders to swallow, but the humble citizens wanted their now remote leaders to acknowledge their plight. Lesson: Mandela was humble enough to say that we haven’t brought enough change — that even he was disappointed — without threatening the ANC’s claim to govern. “He began to tell a compelling story that explained why advances were slow, pointed to areas of progress and allowed people to be hopeful about future changes,” said Greenberg.
The über-lesson for presidents? You can’t be too honest in describing big problems, too bold in offering big solutions, too humble in dealing with big missteps, too forward in re-telling your story or too gutsy in speaking the previously unspeakable.
http://www.nytimes.com/2009/03/25/opini ... nted=print
March 29, 2009
Op-Ed Columnist
Mother Nature’s Dow
By THOMAS L. FRIEDMAN
While I’m convinced that our current financial crisis is the product of both The Market and Mother Nature hitting the wall at once — telling us we need to grow in more sustainable ways — some might ask this: We know when the market hits a wall. It shows up in red numbers on the Dow. But Mother Nature doesn’t have a Dow. What makes you think she’s hitting a wall, too? And even if she is: Who cares? When my 401(k) is collapsing, it’s hard to worry about my sea level rising.
It’s true, Mother Nature doesn’t tell us with one simple number how she’s feeling. But if you follow climate science, what has been striking is how insistently some of the world’s best scientists have been warning — in just the past few months — that climate change is happening faster and will bring bigger changes quicker than we anticipated just a few years ago. Indeed, if Mother Nature had a Dow, you could say that it, too, has been breaking into new (scientific) lows.
Consider just two recent articles:
The Washington Post reported on Feb. 1, that “the pace of global warming is likely to be much faster than recent predictions, because industrial greenhouse gas emissions have increased more quickly than expected and higher temperatures are triggering self-reinforcing feedback mechanisms in global ecosystems, scientists said. ‘We are basically looking now at a future climate that’s beyond anything we’ve considered seriously in climate model simulations,’ Christopher Field, director of the Carnegie Institution’s Department of Global Ecology at Stanford University, said.”
The physicist and climate expert Joe Romm recently noted on his blog, climateprogress.org, that in January, M.I.T.’s Joint Program on the Science and Policy of Global Change quietly updated its Integrated Global System Model that tracks and predicts climate change from 1861 to 2100. Its revised projection indicates that if we stick with business as usual, in terms of carbon-dioxide emissions, average surface temperatures on Earth by 2100 will hit levels far beyond anything humans have ever experienced.
“In our more recent global model simulations,” explained M.I.T., “the ocean heat-uptake is slower than previously estimated, the ocean uptake of carbon is weaker, feedbacks from the land system as temperature rises are stronger, cumulative emissions of greenhouse gases over the century are higher, and offsetting cooling from aerosol emissions is lower. Not one of these effects is very strong on its own, and even adding each separately together would not fully explain the higher temperatures. [But,] rather than interacting additively, these different effects appear to interact multiplicatively, with feedbacks among the contributing factors, leading to the surprisingly large increase in the chance of much higher temperatures.”
What to do? It would be nice to say, “Hey, Mother Nature, we’re having a credit crisis, could you take a couple years off?” But as the environmental consultant Rob Watson likes to say, “Mother Nature is just chemistry, biology and physics,” and she is going to do whatever they dictate. You can’t sweet talk Mother Nature or the market. You have to change the economics to affect the Dow and the chemistry, biology and physics to affect Mother Nature.
That’s why we need a climate bailout along with our economic bailout. Hal Harvey is the C.E.O. of a new $1 billion foundation, ClimateWorks, set up to accelerate the policy changes that can avoid climate catastrophe by taking climate policies from where they are working the best to the places where they are needed the most.
“There are five policies that can help us win the energy-climate battle, and each has been proven somewhere,” Harvey explained. First, building codes: California’s energy-efficient building and appliance codes now save Californians $6 billion per year,” he said. Second, better vehicle fuel-efficiency standards: “The European Union’s fuel-efficiency fleet average for new cars now stands at 41 miles per gallon, and is rising steadily,” he added.
Third, we need a national renewable portfolio standard, mandating that power utilities produce 15 or 20 percent of their energy from renewables by 2020. Right now, only about half our states have these. “Whenever utilities are required to purchase electricity from renewable sources,” said Harvey, “clean energy booms.” (See Germany’s solar business or Texas’s wind power.)
The fourth is decoupling — the program begun in California that turns the utility business on its head. Under decoupling, power utilities make money by helping homeowners save energy rather than by encouraging them to consume it. “Finally,” said Harvey, “we need a price on carbon.” Polluting the atmosphere can’t be free.
These are the pillars of a climate bailout. Yes, some have upfront costs. But all of them would pay long-term dividends, because they would foster massive U.S. innovation in new clean technologies that would stimulate the real Dow and much lower emissions that would stimulate the Climate Dow.
http://www.nytimes.com/2009/03/29/opini ... nted=print
Op-Ed Columnist
Mother Nature’s Dow
By THOMAS L. FRIEDMAN
While I’m convinced that our current financial crisis is the product of both The Market and Mother Nature hitting the wall at once — telling us we need to grow in more sustainable ways — some might ask this: We know when the market hits a wall. It shows up in red numbers on the Dow. But Mother Nature doesn’t have a Dow. What makes you think she’s hitting a wall, too? And even if she is: Who cares? When my 401(k) is collapsing, it’s hard to worry about my sea level rising.
It’s true, Mother Nature doesn’t tell us with one simple number how she’s feeling. But if you follow climate science, what has been striking is how insistently some of the world’s best scientists have been warning — in just the past few months — that climate change is happening faster and will bring bigger changes quicker than we anticipated just a few years ago. Indeed, if Mother Nature had a Dow, you could say that it, too, has been breaking into new (scientific) lows.
Consider just two recent articles:
The Washington Post reported on Feb. 1, that “the pace of global warming is likely to be much faster than recent predictions, because industrial greenhouse gas emissions have increased more quickly than expected and higher temperatures are triggering self-reinforcing feedback mechanisms in global ecosystems, scientists said. ‘We are basically looking now at a future climate that’s beyond anything we’ve considered seriously in climate model simulations,’ Christopher Field, director of the Carnegie Institution’s Department of Global Ecology at Stanford University, said.”
The physicist and climate expert Joe Romm recently noted on his blog, climateprogress.org, that in January, M.I.T.’s Joint Program on the Science and Policy of Global Change quietly updated its Integrated Global System Model that tracks and predicts climate change from 1861 to 2100. Its revised projection indicates that if we stick with business as usual, in terms of carbon-dioxide emissions, average surface temperatures on Earth by 2100 will hit levels far beyond anything humans have ever experienced.
“In our more recent global model simulations,” explained M.I.T., “the ocean heat-uptake is slower than previously estimated, the ocean uptake of carbon is weaker, feedbacks from the land system as temperature rises are stronger, cumulative emissions of greenhouse gases over the century are higher, and offsetting cooling from aerosol emissions is lower. Not one of these effects is very strong on its own, and even adding each separately together would not fully explain the higher temperatures. [But,] rather than interacting additively, these different effects appear to interact multiplicatively, with feedbacks among the contributing factors, leading to the surprisingly large increase in the chance of much higher temperatures.”
What to do? It would be nice to say, “Hey, Mother Nature, we’re having a credit crisis, could you take a couple years off?” But as the environmental consultant Rob Watson likes to say, “Mother Nature is just chemistry, biology and physics,” and she is going to do whatever they dictate. You can’t sweet talk Mother Nature or the market. You have to change the economics to affect the Dow and the chemistry, biology and physics to affect Mother Nature.
That’s why we need a climate bailout along with our economic bailout. Hal Harvey is the C.E.O. of a new $1 billion foundation, ClimateWorks, set up to accelerate the policy changes that can avoid climate catastrophe by taking climate policies from where they are working the best to the places where they are needed the most.
“There are five policies that can help us win the energy-climate battle, and each has been proven somewhere,” Harvey explained. First, building codes: California’s energy-efficient building and appliance codes now save Californians $6 billion per year,” he said. Second, better vehicle fuel-efficiency standards: “The European Union’s fuel-efficiency fleet average for new cars now stands at 41 miles per gallon, and is rising steadily,” he added.
Third, we need a national renewable portfolio standard, mandating that power utilities produce 15 or 20 percent of their energy from renewables by 2020. Right now, only about half our states have these. “Whenever utilities are required to purchase electricity from renewable sources,” said Harvey, “clean energy booms.” (See Germany’s solar business or Texas’s wind power.)
The fourth is decoupling — the program begun in California that turns the utility business on its head. Under decoupling, power utilities make money by helping homeowners save energy rather than by encouraging them to consume it. “Finally,” said Harvey, “we need a price on carbon.” Polluting the atmosphere can’t be free.
These are the pillars of a climate bailout. Yes, some have upfront costs. But all of them would pay long-term dividends, because they would foster massive U.S. innovation in new clean technologies that would stimulate the real Dow and much lower emissions that would stimulate the Climate Dow.
http://www.nytimes.com/2009/03/29/opini ... nted=print
April 1, 2009
Op-Ed Columnist
The Price Is Not Right
By THOMAS L. FRIEDMAN
I don’t expect much from the G-20 meeting this week, but if I had my wish, the leaders of the world’s 20 top economies would commit themselves to a new standard of accounting — call it “Market to Mother Nature” accounting. Why? Because it’s now obvious that the reason we’re experiencing a simultaneous meltdown in the financial system and the climate system is because we have been mispricing risk in both arenas — producing a huge excess of both toxic assets and toxic air that now threatens the stability of the whole planet.
Just as A.I.G. sold insurance derivatives at prices that did not reflect the real costs and the real risks of massive defaults (for which we the taxpayers ended up paying the difference), oil companies, coal companies and electric utilities today are selling energy products at prices that do not reflect the real costs to the environment and real risks of disruptive climate change (so future taxpayers will end up paying the difference).
Whenever products are mispriced and do not reflect the real costs and risks associated with their usage, people go to excess. And that is exactly what happened in the financial marketplace and in the energy/environmental marketplace during the credit bubble.
Our biggest financial-services companies, some of which came to be seen as too big to fail, engaged in complex financial trading schemes that did not adequately price in the costs and risks of a market reversal. A.I.G., for instance, was selling insurance for all kinds of financial instruments and did not have anywhere near adequate reserves to cover claims if things went badly wrong, as they did. And our biggest energy companies, utilities and auto companies became dependent on cheap hydrocarbons that spin off climate-changing greenhouse gases, and we clearly have not forced them, through a carbon tax, to price in the true risks and costs to society from these climate-changing fuels.
“When the balance sheet of a company does not capture the true costs and risks of its business activities,” and when that company is too big to fail, “you end up with them privatizing their gains and socializing their losses,” Nandan Nilekani, the co-chairman of the Indian technology company Infosys, remarked to me. That is, everyone gets to rack up their private profits today and pay them out in current bonuses and dividends. But any catastrophic losses — if the company is too big to fail — “get socialized and paid off by taxpayers.”
This is why we need new banking regulation that reins in the leverage and speculative trading that big banks and insurance companies can undertake so they never again become simultaneously too reckless to regulate but too big fail and taxpayers are forced to pay off the toxic assets they accumulate. And this is also why we need a tax on carbon — so we and our power utilities don’t become permanently addicted to cheap coal that makes for lower electricity prices today but spits out toxic greenhouse gases that have to be paid for by future generations tomorrow.
That’s what “Market to Mother Nature” accounting is all about. It begins with the premise that the distinction between the G-20 and the Copenhagen climate change negotiations is totally artificial. They are just flip sides of the same global problem — how we as a world keep raising standards of living for more and more people in ways that will not, as a byproduct, have both the Market and Mother Nature producing huge amounts of toxic assets.
The old system, which has reached its financial and environmental limits, worked like this: We built more and more stores in America to sell more and more stuff, which was made in more and more Chinese factories powered by more and more coal that earned more and more dollars to buy more and more U.S. T-bills that got recycled back to America in the form of cheap credit to build more and more stores and more and more houses that gave rise to more and more Chinese factories. ...
This system was a powerful engine of wealth creation and lifted millions out of poverty, but it relied upon the risks to the Market and to Mother Nature being underpriced and to profits being privatized in good times and losses socialized in bad times. This capitalist engine doesn’t need to be discarded; it needs some fixes. For starters, we need to get back to basics — accountable lending, prudent saving, reasonable leverage and, most important, more engineering of goods than just financial products.
Some of our biggest financial firms got away from their original purpose — to fund innovation and to finance the process of “creative destruction,” whereby new technologies that improve people’s lives replace old ones, said the Columbia University economist Jagdish Bhagwati, in an interview in The American Interest. Instead, he added, too many banks got involved in exotic and incomprehensible financial innovations — to simply make money out of money — which ended up as “destructive creation.”
“Destructive creation” has wounded both the Market and Mother Nature. Smart regulation and carbon taxation can heal both.
Op-Ed Columnist
The Price Is Not Right
By THOMAS L. FRIEDMAN
I don’t expect much from the G-20 meeting this week, but if I had my wish, the leaders of the world’s 20 top economies would commit themselves to a new standard of accounting — call it “Market to Mother Nature” accounting. Why? Because it’s now obvious that the reason we’re experiencing a simultaneous meltdown in the financial system and the climate system is because we have been mispricing risk in both arenas — producing a huge excess of both toxic assets and toxic air that now threatens the stability of the whole planet.
Just as A.I.G. sold insurance derivatives at prices that did not reflect the real costs and the real risks of massive defaults (for which we the taxpayers ended up paying the difference), oil companies, coal companies and electric utilities today are selling energy products at prices that do not reflect the real costs to the environment and real risks of disruptive climate change (so future taxpayers will end up paying the difference).
Whenever products are mispriced and do not reflect the real costs and risks associated with their usage, people go to excess. And that is exactly what happened in the financial marketplace and in the energy/environmental marketplace during the credit bubble.
Our biggest financial-services companies, some of which came to be seen as too big to fail, engaged in complex financial trading schemes that did not adequately price in the costs and risks of a market reversal. A.I.G., for instance, was selling insurance for all kinds of financial instruments and did not have anywhere near adequate reserves to cover claims if things went badly wrong, as they did. And our biggest energy companies, utilities and auto companies became dependent on cheap hydrocarbons that spin off climate-changing greenhouse gases, and we clearly have not forced them, through a carbon tax, to price in the true risks and costs to society from these climate-changing fuels.
“When the balance sheet of a company does not capture the true costs and risks of its business activities,” and when that company is too big to fail, “you end up with them privatizing their gains and socializing their losses,” Nandan Nilekani, the co-chairman of the Indian technology company Infosys, remarked to me. That is, everyone gets to rack up their private profits today and pay them out in current bonuses and dividends. But any catastrophic losses — if the company is too big to fail — “get socialized and paid off by taxpayers.”
This is why we need new banking regulation that reins in the leverage and speculative trading that big banks and insurance companies can undertake so they never again become simultaneously too reckless to regulate but too big fail and taxpayers are forced to pay off the toxic assets they accumulate. And this is also why we need a tax on carbon — so we and our power utilities don’t become permanently addicted to cheap coal that makes for lower electricity prices today but spits out toxic greenhouse gases that have to be paid for by future generations tomorrow.
That’s what “Market to Mother Nature” accounting is all about. It begins with the premise that the distinction between the G-20 and the Copenhagen climate change negotiations is totally artificial. They are just flip sides of the same global problem — how we as a world keep raising standards of living for more and more people in ways that will not, as a byproduct, have both the Market and Mother Nature producing huge amounts of toxic assets.
The old system, which has reached its financial and environmental limits, worked like this: We built more and more stores in America to sell more and more stuff, which was made in more and more Chinese factories powered by more and more coal that earned more and more dollars to buy more and more U.S. T-bills that got recycled back to America in the form of cheap credit to build more and more stores and more and more houses that gave rise to more and more Chinese factories. ...
This system was a powerful engine of wealth creation and lifted millions out of poverty, but it relied upon the risks to the Market and to Mother Nature being underpriced and to profits being privatized in good times and losses socialized in bad times. This capitalist engine doesn’t need to be discarded; it needs some fixes. For starters, we need to get back to basics — accountable lending, prudent saving, reasonable leverage and, most important, more engineering of goods than just financial products.
Some of our biggest financial firms got away from their original purpose — to fund innovation and to finance the process of “creative destruction,” whereby new technologies that improve people’s lives replace old ones, said the Columbia University economist Jagdish Bhagwati, in an interview in The American Interest. Instead, he added, too many banks got involved in exotic and incomprehensible financial innovations — to simply make money out of money — which ended up as “destructive creation.”
“Destructive creation” has wounded both the Market and Mother Nature. Smart regulation and carbon taxation can heal both.
April 2, 2009
Op-Ed Columnist
America Agonistes
By ROGER COHEN
LONDON — Pax Americana, unlovely but effective, has endured for more than 60 years, the consequence of the post-war development of the United States as a European and Asian power. It has averted the worst, but it is safe to say that it is closer to the end than the beginning of its life.
I say this with no enthusiasm. As a beneficiary of America’s far-flung garrisons, and a member of a generation blessed (as the Germans say) with late birth, I have few illusions about what greater disasters might have befallen Europe and Asia without the offsetting presence of U.S. power.
But, as General Motors has discovered, history moves on.
G.M., in fact, is not a bad emblem for this moment when the world’s tectonic plates are plainly on the move. No corporation ever symbolized American might with greater vividness. It topped the first “Fortune 500” list in 1955, the year I was born, and was in the top three by revenue every year until 2007. Now it is all but bankrupt.
There are many reasons for this debacle, including GM’s failure to adapt to the shift to a low-carbon economy, the general decline of manufacturing in the United States, and global competition. G.M. lost out as America changed. Emma Rothschild noted recently in The New York Review of Books that U.S. consumers spent less on new cars in 2007 than on brokerage fees and investment counseling!
Where that debt-driven American investment binge led is now clear: to financial meltdown, tens of millions of lost jobs and a global hunt for fat-cat scapegoats paying themselves bonuses for failure. Anglo-American capitalism is on trial, the Thatcher and Reagan revolutions exhausted.
From this wreckage, this ending, the Group of 20 must trace the contours of a 21st century global economy. The task embarked on here in London will be long. As it happens, it has begun in the same week as NATO leaders meet in France and Germany to mark the Atlantic Alliance’s 60th birthday. These gatherings — of an old and a new organization — both mark America’s changing place in the world.
At the G-20, the power of free markets — the American mantra of recent decades — is in retreat before state intervention, led in many respects by a chastened United States itself that has discovered some merit in the oft-mocked European model.
More fundamentally, it is clear that the answers do not lie in Washington, where consensus has long been sought, but increasingly in new centers of economic power and new forms of global cooperation. The G-20 itself — with the presence of the likes of China, Brazil, India and South Africa — reflects this reality.
China’s demand for greater power within the International Monetary Fund, its provocative questioning of the dollar as the world’s reserve currency, and the ultimate dependence of a debtor nation like the United States on changed behavior from the mega-surplus powers of China, Germany and Japan are all indicators of American vulnerability.
Such vulnerability is not confined to the economic sphere. Its treasure depleted, its dominance eroded, its standing questioned, America cannot forever bankroll the security of the world.
That will be a reality of the 21st century, not perhaps its first couple of decades, but increasingly over time. The NATO summit, however celebratory in towns that symbolize Europe’s American-assisted overcoming of its collective suicide, must begin to grapple with this inevitability.
For beyond the troubled Afghan mission, itself an eloquent expression of NATO’s ongoing transformation, and beyond the critical question of the alliance’s relations with Russia, lies a still more fundamental issue: what exactly is a post-cold-war NATO for and how will American power be projected within it?
In pondering this, I’m struck by a defining event of this summit: the return of France to the integrated military command of NATO. Poor de Gaulle; he must be turning in his grave. But give President Nicolas Sarkozy credit where it’s due: there was no point in prolonging the quixotic Gallic pursuit of “counterweight” status to the United States when U.S. power itself was dwindling. Why counter an eroding weight?
One result of Sarkozy’s volte-face is that a French general will preside in Virginia over the Allied Command Transformation project, devoted to blue-sky re-imaginings of the alliance. I like the idea of a Frenchman in the United States rethinking the world: friction stimulates.
My own view, based in the conviction that Pax Americana cannot endure another 60 years in its current form, is that a NATO now tacitly or explicitly working for the defense and expansion of the liberal democratic order — a task with no obvious geographical limit — must in time evolve into an alliance of democracies in which the likes of Japan, India and Australia would logically take their place.
One of Barack Obama’s central strategic tasks is to forge a more balanced world order that will advance American interests, political and economic, even at the price of diminished American pre-eminence. Fortunately this most cosmopolitan of U.S. presidents is well suited to the task. A guiding intelligence has replaced a guiding anger at the White House.
Op-Ed Columnist
America Agonistes
By ROGER COHEN
LONDON — Pax Americana, unlovely but effective, has endured for more than 60 years, the consequence of the post-war development of the United States as a European and Asian power. It has averted the worst, but it is safe to say that it is closer to the end than the beginning of its life.
I say this with no enthusiasm. As a beneficiary of America’s far-flung garrisons, and a member of a generation blessed (as the Germans say) with late birth, I have few illusions about what greater disasters might have befallen Europe and Asia without the offsetting presence of U.S. power.
But, as General Motors has discovered, history moves on.
G.M., in fact, is not a bad emblem for this moment when the world’s tectonic plates are plainly on the move. No corporation ever symbolized American might with greater vividness. It topped the first “Fortune 500” list in 1955, the year I was born, and was in the top three by revenue every year until 2007. Now it is all but bankrupt.
There are many reasons for this debacle, including GM’s failure to adapt to the shift to a low-carbon economy, the general decline of manufacturing in the United States, and global competition. G.M. lost out as America changed. Emma Rothschild noted recently in The New York Review of Books that U.S. consumers spent less on new cars in 2007 than on brokerage fees and investment counseling!
Where that debt-driven American investment binge led is now clear: to financial meltdown, tens of millions of lost jobs and a global hunt for fat-cat scapegoats paying themselves bonuses for failure. Anglo-American capitalism is on trial, the Thatcher and Reagan revolutions exhausted.
From this wreckage, this ending, the Group of 20 must trace the contours of a 21st century global economy. The task embarked on here in London will be long. As it happens, it has begun in the same week as NATO leaders meet in France and Germany to mark the Atlantic Alliance’s 60th birthday. These gatherings — of an old and a new organization — both mark America’s changing place in the world.
At the G-20, the power of free markets — the American mantra of recent decades — is in retreat before state intervention, led in many respects by a chastened United States itself that has discovered some merit in the oft-mocked European model.
More fundamentally, it is clear that the answers do not lie in Washington, where consensus has long been sought, but increasingly in new centers of economic power and new forms of global cooperation. The G-20 itself — with the presence of the likes of China, Brazil, India and South Africa — reflects this reality.
China’s demand for greater power within the International Monetary Fund, its provocative questioning of the dollar as the world’s reserve currency, and the ultimate dependence of a debtor nation like the United States on changed behavior from the mega-surplus powers of China, Germany and Japan are all indicators of American vulnerability.
Such vulnerability is not confined to the economic sphere. Its treasure depleted, its dominance eroded, its standing questioned, America cannot forever bankroll the security of the world.
That will be a reality of the 21st century, not perhaps its first couple of decades, but increasingly over time. The NATO summit, however celebratory in towns that symbolize Europe’s American-assisted overcoming of its collective suicide, must begin to grapple with this inevitability.
For beyond the troubled Afghan mission, itself an eloquent expression of NATO’s ongoing transformation, and beyond the critical question of the alliance’s relations with Russia, lies a still more fundamental issue: what exactly is a post-cold-war NATO for and how will American power be projected within it?
In pondering this, I’m struck by a defining event of this summit: the return of France to the integrated military command of NATO. Poor de Gaulle; he must be turning in his grave. But give President Nicolas Sarkozy credit where it’s due: there was no point in prolonging the quixotic Gallic pursuit of “counterweight” status to the United States when U.S. power itself was dwindling. Why counter an eroding weight?
One result of Sarkozy’s volte-face is that a French general will preside in Virginia over the Allied Command Transformation project, devoted to blue-sky re-imaginings of the alliance. I like the idea of a Frenchman in the United States rethinking the world: friction stimulates.
My own view, based in the conviction that Pax Americana cannot endure another 60 years in its current form, is that a NATO now tacitly or explicitly working for the defense and expansion of the liberal democratic order — a task with no obvious geographical limit — must in time evolve into an alliance of democracies in which the likes of Japan, India and Australia would logically take their place.
One of Barack Obama’s central strategic tasks is to forge a more balanced world order that will advance American interests, political and economic, even at the price of diminished American pre-eminence. Fortunately this most cosmopolitan of U.S. presidents is well suited to the task. A guiding intelligence has replaced a guiding anger at the White House.
April 3, 2009
Op-Ed Columnist
Greed and Stupidity
By DAVID BROOKS
What happened to the global economy? We seemed to be chugging along, enjoying moderate business cycles and unprecedented global growth. All of a sudden, all hell broke loose.
There are many theories about what happened, but two general narratives seem to be gaining prominence, which we will call the greed narrative and the stupidity narrative. The two overlap, but they lead to different ways of thinking about where we go from here.
The best single encapsulation of the greed narrative is an essay called “The Quiet Coup,” by Simon Johnson in The Atlantic (available online now).
Johnson begins with a trend. Between 1973 and 1985, the U.S. financial sector accounted for about 16 percent of domestic corporate profits. In the 1990s, it ranged from 21 percent to 30 percent. This decade, it soared to 41 percent.
In other words, Wall Street got huge. As it got huge, its prestige grew. Its compensation packages grew. Its political power grew as well. Wall Street and Washington merged as a flow of investment bankers went down to the White House and the Treasury Department.
The result was a string of legislation designed to further enhance the freedom and power of finance. Regulations separating commercial and investment banking were repealed. There were major increases in the amount of leverage allowed to investment banks.
The U.S. economy got finance-heavy and finance-mad, and finally collapsed. When it did, the elites did what all elites do. They took care of their own: “Money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves,” Johnson writes.
In short, he argues, the U.S. financial crisis is a bigger version of the crises that have afflicted emerging-market nations for decades. An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. Johnson’s remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.
The second and, to me, more persuasive theory revolves around ignorance and uncertainty. The primary problem is not the greed of a giant oligarchy. It’s that overconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk. But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
Many writers have described elements of this intellectual hubris. Amar Bhidé has described the fallacy of diversification. Bankers thought that if they bundled slices of many assets into giant packages then they didn’t have to perform due diligence on each one. In Wired, Felix Salmon described the false lure of the Gaussian copula function, the formula that gave finance whizzes the illusion that they could accurately calculate risks. Benoit Mandelbrot and Nassim Taleb have explained why extreme events are much more likely to disrupt financial markets than most bankers understood.
To me, the most interesting factor is the way instant communications lead to unconscious conformity. You’d think that with thousands of ideas flowing at light speed around the world, you’d get a diversity of viewpoints and expectations that would balance one another out. Instead, global communications seem to have led people in the financial subculture to adopt homogenous viewpoints. They made the same one-way bets at the same time.
Jerry Z. Muller wrote an indispensable version of the stupidity narrative in an essay called “Our Epistemological Depression” in The American magazine. What’s new about this crisis, he writes, is the central role of “opacity and pseudo-objectivity.” Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives.
We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.
Op-Ed Columnist
Greed and Stupidity
By DAVID BROOKS
What happened to the global economy? We seemed to be chugging along, enjoying moderate business cycles and unprecedented global growth. All of a sudden, all hell broke loose.
There are many theories about what happened, but two general narratives seem to be gaining prominence, which we will call the greed narrative and the stupidity narrative. The two overlap, but they lead to different ways of thinking about where we go from here.
The best single encapsulation of the greed narrative is an essay called “The Quiet Coup,” by Simon Johnson in The Atlantic (available online now).
Johnson begins with a trend. Between 1973 and 1985, the U.S. financial sector accounted for about 16 percent of domestic corporate profits. In the 1990s, it ranged from 21 percent to 30 percent. This decade, it soared to 41 percent.
In other words, Wall Street got huge. As it got huge, its prestige grew. Its compensation packages grew. Its political power grew as well. Wall Street and Washington merged as a flow of investment bankers went down to the White House and the Treasury Department.
The result was a string of legislation designed to further enhance the freedom and power of finance. Regulations separating commercial and investment banking were repealed. There were major increases in the amount of leverage allowed to investment banks.
The U.S. economy got finance-heavy and finance-mad, and finally collapsed. When it did, the elites did what all elites do. They took care of their own: “Money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves,” Johnson writes.
In short, he argues, the U.S. financial crisis is a bigger version of the crises that have afflicted emerging-market nations for decades. An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. Johnson’s remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.
The second and, to me, more persuasive theory revolves around ignorance and uncertainty. The primary problem is not the greed of a giant oligarchy. It’s that overconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk. But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
Many writers have described elements of this intellectual hubris. Amar Bhidé has described the fallacy of diversification. Bankers thought that if they bundled slices of many assets into giant packages then they didn’t have to perform due diligence on each one. In Wired, Felix Salmon described the false lure of the Gaussian copula function, the formula that gave finance whizzes the illusion that they could accurately calculate risks. Benoit Mandelbrot and Nassim Taleb have explained why extreme events are much more likely to disrupt financial markets than most bankers understood.
To me, the most interesting factor is the way instant communications lead to unconscious conformity. You’d think that with thousands of ideas flowing at light speed around the world, you’d get a diversity of viewpoints and expectations that would balance one another out. Instead, global communications seem to have led people in the financial subculture to adopt homogenous viewpoints. They made the same one-way bets at the same time.
Jerry Z. Muller wrote an indispensable version of the stupidity narrative in an essay called “Our Epistemological Depression” in The American magazine. What’s new about this crisis, he writes, is the central role of “opacity and pseudo-objectivity.” Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives.
We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.
April 12, 2009
Op-Ed Columnist
(No) Drill, Baby, Drill
By THOMAS L. FRIEDMAN
Liberia, Costa Rica
Sailing down Costa Rica’s Tempisque River on an eco-tour, I watched a crocodile devour a brown bass with one gulp. It took only a few seconds. The croc’s head emerged from the muddy waters near the bank with the footlong fish writhing in its jaws. He crunched it a couple of times with razor-sharp teeth and then, with just the slightest flip of his snout, swallowed the fish whole. Never saw that before.
These days, visitors can still see amazing biodiversity all over Costa Rica — more than 25 percent of the country is protected area — thanks to a unique system it set up to preserve its cornucopia of plants and animals. Many countries could learn a lot from this system.
More than any nation I’ve ever visited, Costa Rica is insisting that economic growth and environmentalism work together. It has created a holistic strategy to think about growth, one that demands that everything gets counted. So if a chemical factory sells tons of fertilizer but pollutes a river — or a farm sells bananas but destroys a carbon-absorbing and species-preserving forest — this is not honest growth. You have to pay for using nature. It is called “payment for environmental services” — nobody gets to treat climate, water, coral, fish and forests as free anymore.
The process began in the 1990s when Costa Rica, which sits at the intersection of two continents and two oceans, came to fully appreciate its incredible bounty of biodiversity — and that its economic future lay in protecting it. So it did something no country has ever done: It put energy, environment, mines and water all under one minister.
“In Costa Rica, the minister of environment sets the policy for energy, mines, water and natural resources,” explained Carlos M. Rodríguez, who served in that post from 2002 to 2006. In most countries, he noted, “ministers of environment are marginalized.” They are viewed as people who try to lock things away, not as people who create value. Their job is to fight energy ministers who just want to drill for cheap oil.
But when Costa Rica put one minister in charge of energy and environment, “it created a very different way of thinking about how to solve problems,” said Rodríguez, now a regional vice president for Conservation International. “The environment sector was able to influence the energy choices by saying: ‘Look, if you want cheap energy, the cheapest energy in the long-run is renewable energy. So let’s not think just about the next six months; let’s think out 25 years.’ ”
As a result, Costa Rica hugely invested in hydro-electric power, wind and geo-thermal, and today it gets more than 95 percent of its energy from these renewables. In 1985, it was 50 percent hydro, 50 percent oil. More interesting, Costa Rica discovered its own oil five years ago but decided to ban drilling — so as not to pollute its politics or environment! What country bans oil drilling?
Rodríguez also helped to pioneer the idea that in a country like Costa Rica, dependent on tourism and agriculture, the services provided by ecosystems were important drivers of growth and had to be paid for. Right now, most countries fail to account for the “externalities” of various economic activities. So when a factory, farmer or power plant pollutes the air or the river, destroys a wetland, depletes a fish stock or silts a river — making the water no longer usable — that cost is never added to your electric bill or to the price of your shoes.
Costa Rica took the view that landowners who keep their forests intact and their rivers clean should be paid, because the forests maintained the watersheds and kept the rivers free of silt — and that benefited dam owners, fishermen, farmers and eco-tour companies downstream. The forests also absorbed carbon.
To pay for these environmental services, in 1997 Costa Rica imposed a tax on carbon emissions — 3.5 percent of the market value of fossil fuels — which goes into a national forest fund to pay indigenous communities for protecting the forests around them. And the country imposed a water tax whereby major water users — hydro-electric dams, farmers and drinking water providers — had to pay villagers upstream to keep their rivers pristine. “We now have 7,000 beneficiaries of water and carbon taxes,” said Rodríguez. “It has become a major source of income for poor people. It has also enabled Costa Rica to actually reverse deforestation. We now have twice the amount of forest as 20 years ago.”
As we debate a new energy future, we need to remember that nature provides this incredible range of economic services — from carbon-fixation to water filtration to natural beauty for tourism. If government policies don’t recognize those services and pay the people who sustain nature’s ability to provide them, things go haywire. We end up impoverishing both nature and people. Worse, we start racking up a bill in the form of climate-changing greenhouse gases, petro-dictatorships and bio-diversity loss that gets charged on our kids’ Visa cards to be paid by them later. Well, later is over. Later is when it will be too late.
Op-Ed Columnist
(No) Drill, Baby, Drill
By THOMAS L. FRIEDMAN
Liberia, Costa Rica
Sailing down Costa Rica’s Tempisque River on an eco-tour, I watched a crocodile devour a brown bass with one gulp. It took only a few seconds. The croc’s head emerged from the muddy waters near the bank with the footlong fish writhing in its jaws. He crunched it a couple of times with razor-sharp teeth and then, with just the slightest flip of his snout, swallowed the fish whole. Never saw that before.
These days, visitors can still see amazing biodiversity all over Costa Rica — more than 25 percent of the country is protected area — thanks to a unique system it set up to preserve its cornucopia of plants and animals. Many countries could learn a lot from this system.
More than any nation I’ve ever visited, Costa Rica is insisting that economic growth and environmentalism work together. It has created a holistic strategy to think about growth, one that demands that everything gets counted. So if a chemical factory sells tons of fertilizer but pollutes a river — or a farm sells bananas but destroys a carbon-absorbing and species-preserving forest — this is not honest growth. You have to pay for using nature. It is called “payment for environmental services” — nobody gets to treat climate, water, coral, fish and forests as free anymore.
The process began in the 1990s when Costa Rica, which sits at the intersection of two continents and two oceans, came to fully appreciate its incredible bounty of biodiversity — and that its economic future lay in protecting it. So it did something no country has ever done: It put energy, environment, mines and water all under one minister.
“In Costa Rica, the minister of environment sets the policy for energy, mines, water and natural resources,” explained Carlos M. Rodríguez, who served in that post from 2002 to 2006. In most countries, he noted, “ministers of environment are marginalized.” They are viewed as people who try to lock things away, not as people who create value. Their job is to fight energy ministers who just want to drill for cheap oil.
But when Costa Rica put one minister in charge of energy and environment, “it created a very different way of thinking about how to solve problems,” said Rodríguez, now a regional vice president for Conservation International. “The environment sector was able to influence the energy choices by saying: ‘Look, if you want cheap energy, the cheapest energy in the long-run is renewable energy. So let’s not think just about the next six months; let’s think out 25 years.’ ”
As a result, Costa Rica hugely invested in hydro-electric power, wind and geo-thermal, and today it gets more than 95 percent of its energy from these renewables. In 1985, it was 50 percent hydro, 50 percent oil. More interesting, Costa Rica discovered its own oil five years ago but decided to ban drilling — so as not to pollute its politics or environment! What country bans oil drilling?
Rodríguez also helped to pioneer the idea that in a country like Costa Rica, dependent on tourism and agriculture, the services provided by ecosystems were important drivers of growth and had to be paid for. Right now, most countries fail to account for the “externalities” of various economic activities. So when a factory, farmer or power plant pollutes the air or the river, destroys a wetland, depletes a fish stock or silts a river — making the water no longer usable — that cost is never added to your electric bill or to the price of your shoes.
Costa Rica took the view that landowners who keep their forests intact and their rivers clean should be paid, because the forests maintained the watersheds and kept the rivers free of silt — and that benefited dam owners, fishermen, farmers and eco-tour companies downstream. The forests also absorbed carbon.
To pay for these environmental services, in 1997 Costa Rica imposed a tax on carbon emissions — 3.5 percent of the market value of fossil fuels — which goes into a national forest fund to pay indigenous communities for protecting the forests around them. And the country imposed a water tax whereby major water users — hydro-electric dams, farmers and drinking water providers — had to pay villagers upstream to keep their rivers pristine. “We now have 7,000 beneficiaries of water and carbon taxes,” said Rodríguez. “It has become a major source of income for poor people. It has also enabled Costa Rica to actually reverse deforestation. We now have twice the amount of forest as 20 years ago.”
As we debate a new energy future, we need to remember that nature provides this incredible range of economic services — from carbon-fixation to water filtration to natural beauty for tourism. If government policies don’t recognize those services and pay the people who sustain nature’s ability to provide them, things go haywire. We end up impoverishing both nature and people. Worse, we start racking up a bill in the form of climate-changing greenhouse gases, petro-dictatorships and bio-diversity loss that gets charged on our kids’ Visa cards to be paid by them later. Well, later is over. Later is when it will be too late.
April 28, 2009
Op-Ed Columnist
Globalism Goes Viral
By DAVID BROOKS
In these post-cold war days, we don’t face a single concentrated threat. We face a series of decentralized, transnational threats: jihadi terrorism, a global financial crisis, global warming, energy scarcity, nuclear proliferation and, as we’re reminded today, possible health pandemics like swine flu.
These decentralized threats grow out of the widening spread and quickening pace of globalization and are magnified by it. Instant global communication and rapid international travel can sometimes lead to universal, systemic shocks. A bank meltdown or a virus will not stay isolated. They have the potential to hit nearly everywhere at once. They can wreck the key nodes of complex international systems.
So how do we deal with these situations? Do we build centralized global institutions that are strong enough to respond to transnational threats? Or do we rely on diverse and decentralized communities and nation-states?
A couple of years ago, G. John Ikenberry of Princeton wrote a superb paper making the case for the centralized response. He argued that America should help build a series of multinational institutions to address global problems. The great powers should construct an “infrastructure of international cooperation ... creating shared capacities to respond to a wide variety of contingencies.”
If you apply that logic to the swine flu, you could say that the world should beef up the World Health Organization to give it the power to analyze the spread of the disease, decide when and where quarantines are necessary and organize a single global response.
If we had a body like that, we wouldn’t be seeing the sort of frictions that are emerging from today’s decentralized approach. Europe has offended the U.S. by warning its citizens not to travel across the Atlantic. Ukraine is restricting pork imports. Europe could hoard flu vaccines, leaving the U.S., which has only one manufacturing plant, high and dry. Fear of a pandemic could lead to a restrictionist race, as nations compete to curtail movement and build walls.
Those dangers are all real. Yet, so far, that’s not the lesson of this crisis. The response to swine flu suggests that a decentralized approach is best. This crisis is only days old, yet we’ve already seen a bottom-up, highly aggressive response.
In the first place, the decentralized approach is much faster. Mexico responded unilaterally and aggressively to close schools and cancel events. The U.S. has responded with astonishing speed, considering there are still few illnesses and just one hospitalization.
The Times published a photo on Monday of the New York City health commissioner, Dr. Thomas R. Frieden, leading a crisis response meeting. The photo is the very image of a focused, local response. People are wearing polo shirts and casual wear — intensely concentrating on the concrete incidents in their own backyard.
If the response were coordinated by a global agency, those local officials would not be so empowered. Power would be wielded by officials from nations that are far away and emotionally aloof from ground zero. The institution would have to poll its members, negotiate internal differences and proceed, as all multinationals do, at the pace of the most recalcitrant stragglers.
Second, the decentralized approach is more credible. It is a fact of human nature that in times of crisis, people like to feel protected by one of their own. They will only trust people who share their historical experience, who understand their cultural assumptions about disease and the threat of outsiders and who have the legitimacy to make brutal choices. If some authority is going to restrict freedom, it should be somebody elected by the people, not a stranger.
Finally, the decentralized approach has coped reasonably well with uncertainty. It is clear from the response, so far, that there is an informal network of scientists who have met over the years and come to certain shared understandings about things like quarantining and rates of infection. It is also clear that there is a ton they don’t understand.
A single global response would produce a uniform approach. A decentralized response fosters experimentation.
The bottom line is that the swine flu crisis is two emergent problems piled on top of one another. At bottom, there is the dynamic network of the outbreak. It is fueled by complex feedback loops consisting of the virus itself, human mobility to spread it and environmental factors to make it potent. On top, there is the psychology of fear caused by the disease. It emerges from rumors, news reports, Tweets and expert warnings.
The correct response to these dynamic, decentralized, emergent problems is to create dynamic, decentralized, emergent authorities: chains of local officials, state agencies, national governments and international bodies that are as flexible as the problem itself.
Swine flu isn’t only a health emergency. It’s a test for how we’re going to organize the 21st century. Subsidiarity works best.
Op-Ed Columnist
Globalism Goes Viral
By DAVID BROOKS
In these post-cold war days, we don’t face a single concentrated threat. We face a series of decentralized, transnational threats: jihadi terrorism, a global financial crisis, global warming, energy scarcity, nuclear proliferation and, as we’re reminded today, possible health pandemics like swine flu.
These decentralized threats grow out of the widening spread and quickening pace of globalization and are magnified by it. Instant global communication and rapid international travel can sometimes lead to universal, systemic shocks. A bank meltdown or a virus will not stay isolated. They have the potential to hit nearly everywhere at once. They can wreck the key nodes of complex international systems.
So how do we deal with these situations? Do we build centralized global institutions that are strong enough to respond to transnational threats? Or do we rely on diverse and decentralized communities and nation-states?
A couple of years ago, G. John Ikenberry of Princeton wrote a superb paper making the case for the centralized response. He argued that America should help build a series of multinational institutions to address global problems. The great powers should construct an “infrastructure of international cooperation ... creating shared capacities to respond to a wide variety of contingencies.”
If you apply that logic to the swine flu, you could say that the world should beef up the World Health Organization to give it the power to analyze the spread of the disease, decide when and where quarantines are necessary and organize a single global response.
If we had a body like that, we wouldn’t be seeing the sort of frictions that are emerging from today’s decentralized approach. Europe has offended the U.S. by warning its citizens not to travel across the Atlantic. Ukraine is restricting pork imports. Europe could hoard flu vaccines, leaving the U.S., which has only one manufacturing plant, high and dry. Fear of a pandemic could lead to a restrictionist race, as nations compete to curtail movement and build walls.
Those dangers are all real. Yet, so far, that’s not the lesson of this crisis. The response to swine flu suggests that a decentralized approach is best. This crisis is only days old, yet we’ve already seen a bottom-up, highly aggressive response.
In the first place, the decentralized approach is much faster. Mexico responded unilaterally and aggressively to close schools and cancel events. The U.S. has responded with astonishing speed, considering there are still few illnesses and just one hospitalization.
The Times published a photo on Monday of the New York City health commissioner, Dr. Thomas R. Frieden, leading a crisis response meeting. The photo is the very image of a focused, local response. People are wearing polo shirts and casual wear — intensely concentrating on the concrete incidents in their own backyard.
If the response were coordinated by a global agency, those local officials would not be so empowered. Power would be wielded by officials from nations that are far away and emotionally aloof from ground zero. The institution would have to poll its members, negotiate internal differences and proceed, as all multinationals do, at the pace of the most recalcitrant stragglers.
Second, the decentralized approach is more credible. It is a fact of human nature that in times of crisis, people like to feel protected by one of their own. They will only trust people who share their historical experience, who understand their cultural assumptions about disease and the threat of outsiders and who have the legitimacy to make brutal choices. If some authority is going to restrict freedom, it should be somebody elected by the people, not a stranger.
Finally, the decentralized approach has coped reasonably well with uncertainty. It is clear from the response, so far, that there is an informal network of scientists who have met over the years and come to certain shared understandings about things like quarantining and rates of infection. It is also clear that there is a ton they don’t understand.
A single global response would produce a uniform approach. A decentralized response fosters experimentation.
The bottom line is that the swine flu crisis is two emergent problems piled on top of one another. At bottom, there is the dynamic network of the outbreak. It is fueled by complex feedback loops consisting of the virus itself, human mobility to spread it and environmental factors to make it potent. On top, there is the psychology of fear caused by the disease. It emerges from rumors, news reports, Tweets and expert warnings.
The correct response to these dynamic, decentralized, emergent problems is to create dynamic, decentralized, emergent authorities: chains of local officials, state agencies, national governments and international bodies that are as flexible as the problem itself.
Swine flu isn’t only a health emergency. It’s a test for how we’re going to organize the 21st century. Subsidiarity works best.