Parts to Wholes: the Socionomic Systems Nexus

On Sept. 11, 2001 the world changed course for most of us, though you could argue it was "just" a rude awakening. But cast your mind back to that day if you can and try and recover the shock and dismay as all the rock-solid beliefs that we all shared were ground to dust and rubble. If you have trouble going back you might let Alan Jackson set the stage - in fact to make my point please do: Where Were You When the World Stopped Turning? It's not clear we're entirely back on our feet even yet but we've made a lot of progress. But on Sept. 28, 2008 there was a bigger change in the world when Lehman collapsed and almost took the entire world economy with it. Why do we say that? Because the world we thought we lived in was a world where not everybody was going to be a millionaire, indeed far from it. But it was a world where we all thought the rock-solid bedrock of America was that everybody would have a chance to better themselves and build a better life for their children. That world got blown up that day. More correctly we all found out that what we thought was bedrock was actually sand, actually quicksand, and we'd been slowly sinking into it for almost three decades. That shock was the earthquake that told us that our most fundamental assumptions about America needed re-examination.

PBS recently covered the history and long-term implications in an interview with The Atlantic reporter who did an excellent story on the future of the middle class, and it's not good on current course and speed. That was the day it was made clear that the "world had stopped turning" for everybody, and the last two years have driven it home. But this time it wasn't a single act of violence but recognition of a fundamental breech in the American Social Contract, the glue that holds us all together.

Continue reading "The Sand Beneath Us - 911 Was Small But the Tea Party Has a Point!" »

Posted by dblwyo at 06:30 PM | Permalink | Comments (0)

Yesterday saw the end of two+ weeks of the best in human performance with the final contests of the Olympics and the Closing Ceremonies. It's been a wonderful two weeks and we plan on discussing it more. But over the same time period we've also seen some other and more important news - call it political sports played at an even higher level of skill and with immensely greater consequences. When a Bode Miller heads down the mountain he's taking years of the hardest work and some unique gifts with him and putting his life on the line (tragically as we now know that's not hyperbole). At last Thur. Health Care Summit there were a lot of Olympic level performers putting on the show of a lifetime but this time what they're putting on the line is our health, the future of our economy, and the chances of your children for the future. And while last week's discussion was more civil, constructive and engaged than either side has been since the beginning it's also a discussion that should have occurred last year, say nine months ago for preference. And it's not the only one. Sadly the results indicated deep partisan divides based on what were advertised as fundamental differences in principle. Even sadder if the principal actors actually knew those principles and how they work out in the real world we wouldn't be facing the challenges we're facing. It's as if Bode was on his gold medal run and opted for the same kind of ski gear his grandfather brought back from the 10th Mountain training camps instead of the best available. The cartoons pretty well capture the realities of the moment.

Re-visiting Deficits, Debts and Outlooks

Shortly after we put up our last really serious policy post (Real State of the Deficits/Debts, Politics and Governance Changes) there was an outstanding panel roundtable on Charlie Rose discussing exactly the same issues. The panel included Paul Krugman, David Walker (ex-Comptroller of the US and current head of the Petersen Institute), Paul Auerbach (an economist from UC-Berkley), Rep. John Spratt (of Ways & Means) and Mohamed El-Erian(co-head of PIMCO). One Nobel, one deeply experienced policy economist and executive, a leading academic expert on the deficits, THE major House congressional player and the co-head of the world's largest bond fund who created the whole idea of the "New Normal". You'd be hard pressed to come up with a different group than that. Despite some differences here and there however we have some good news, bad news and interesting news. The good news is that their take on the world is almost identical to the one we sketched out (stimulus is VITAL in the short-run, deficits and debts are NOT a problem in the intermediate run and the current budget does as well as possible bringing them back under control, deficits in the outyears are a serious, must-solve problem, tax increases will be necessary but the single biggest problem is Healthcare costs. You either control that or you're not serious, period, end-of-story). The catch is that then they petered out with no serious proposals for how to proceed. As opposed to our 3+1 proposal: modest tax increases, bend the cost curve on HC, get the economy growing and invest in innovation). But in any case we really aren't kidding when we say this is serious. You'll find this complementary interview with Peter Orzag is worth your time as well.

Continue reading "Debt, Debates & Decisions: America Heading for the Cusp?" »

Posted by dblwyo at 02:45 PM | Permalink | Comments (0)

Both the proposed US Budget for 2011 and the Economic Report of the President were recently published. Both are well-written, accurate, complete, honest, skilled and inter-linked documents, though the former is probably sleep-inducing and it takes a certain amount of background to get excited about the latter. But you should, both are well worth skimming. The tables of contents if nothing else. Back at the beginning of 2008 we told our network and readers that the single most important issue facing the country would be the Economy but we didn't anticipate either how true that would be or how close to the edge of the abyss we would come. We were, by-the-way, within 24 hours of a complete collapse of world markets. An event that would have been worse than the Great Depression because of the levels of debt and financial leverage, would easily have seen base Unemployment skyrocket to 25-30% and the GDP drop by 20-25%, at least. Bad as our troubles are they could have been enormously worse, literally by orders of magnitude. Be that as it may we're still facing a decade of slow growth, difficult policy decisions and political gridlock. Let's be really, really clear about this. The world has changed more as the result of the economic crisis than it did on 911 - the arc of slow structural evolution in the US and world economies and the associated paths our societies were on are now on entirely new paths. That's why the partisan posturing in Washington is so critical and so dangerous. A major part of the problem is that for most people it really is rocket science. So to help as best we might we're going to devote this entire post to our best attempt at deconstructing the ERP to define the crisis, the impacts, the historical forces that set it up and the consequences for the future. NB: we'll also say this is the first ERP we've looked at that wasn't an apologia for an ideological position but instead a sober appraisal of the facts using the best public data and analysis. We can't emphasize that enough - the analysis in the ERP exactly mirrors that last few years of mainstream thinking, has roots in work that stretches back thirty years and lines up with our own. In fact if you compare the ERP and its TofC and strategies to a post of ours from Oct08 they are identical: Populist Panderings, the Candidates and Real Solutions.

Defining the Baseline: Crisis and Reactions

Let's start by defining the baseline of what happened, in somewhat simplified terms, using charts drawn (as they all are almost) directly from the Report. The details are more complicated of course but here's the gist. In the UL corner you see Housing prices stretching back to 1900. Just by inspection you can see the "mother of all bubbles". Housing prices will always go up indeed - talk about complacent self-delusion. Or that the smartest people in the world couldn't read simple charts! When the bubble began unraveling it took the credit markets down, largely because of leverage and coss-linkages. In the UR you see the spread between 3Mo Treasury bonds and commercial ones (TED) and the BAA-AAA spread between higher risk and low risk commercial paper. Normally the TED spread is infinitesimal. When it goes up people are worried and when it goes to far the money doesn't flow - no car loans, no working loans for businesses, credit cards and money markets are frozen, business and the ordinary business of life STOPs! You can how it got increasingly scary thru 2008 until it blew up into a life-threatening situation. Fortunately the Fed and Treasury have brought things back down into more normal ranges, the the BAA-AAA spreads are still elevated, but at least the markets are alive if not working well.

That's not the end of the story because the financial crisis leaked into the real economy and turned an already weak and accelerating slowdown into a major economic downturn greater than anything since the 1930s. Which you can see in the huge drops in Employment in the LR corner, which while still bad, are coming back as the result of stimulus and other policy actions. In fact in the LL corner you can see the differences in GDP with and without the policy interventions. Despite everything you've heard the stimulus worked, was the largest peacetime effort, was well constructed - especially when you allow for the speed with which it was put together and an act of real political courage and skill. Without it we'd have had Stalingrad instead of Pearl Harbor.

Continue reading "History, Baselines, & Your Future: the Economic Report of the President" »

Posted by dblwyo at 07:17 PM | Permalink | Comments (0)

It being Sunday we're going to combine a little moral philosophy with our political economy and try to draw your attention to the Charter for Compassion. Almost two years Karen Armstrong, the religious scholar by accident, was made a TED fellow and her wish was that we restore Compassion to its central place in the world. And take it out from under the accumulated detritus of dogma, orthodoxies and self-serving distortions that have so long distorted it and religions. But let's start and set the table by looking back a bit at Haiti (Strays, Disasters, & Wars to Davos: Governance, Civility and Pragmatics) by starting with the 25th Anniversary of "We Are the World". In our explorations here of pragmatic compassion we're going to mostly tell the story thru video clips which at ~18min/clip plus two short ones means we're asking for about 90 mins of your time. Other than intrinsic merits though we think the clips are well worth your time for your own sake.

Now we love this song and wholeheartedly admire and agree with the sentiments but there has to be more than mere sentiment here. After you've hopefully re-listened to this new version we'll remind you that the results of the original were some money but no lasting change. And it may be entirely revealing that the Compassion that's so central to the heart of the song, a compassion that ask you to see the Other as an I and then a Thou is sadly a little short-shrifted by the performers who keep checking out their appearances on camera or considering the amount of time the credits take. No matter, let's talk substance - the heart of I and Thou! (Frontline Lessons Brought Home: Others, Selfs and Manners).

The Task of Our Time: Restoring Compassion

The adjacent clip is Karen's recent short speech to the TED audience thanking them but more importantly discussing the role and importance of compassion. Why it's so important to restore the central tenet of every single major religion AND make it active and constructive in the world. Restoring it from the dustbin as it were.

It is rather short but telling but it might be interesting and more important to listen to her original TED Prize Wish speech in which she discusses the nature and role of compassion and why she thinks it's so important. Her's a women who's ended up as one of the most respected thinkers on Religion in the modern world who got there by accident. She was a Catholic nun but left the church to become a literature professor. After some trials and troubles she got involved with the BBC and stumbled into reporting on religion and in the process learned more about Judaism and Islam than she ever had before, either as nun or professor. And found that, at their hearts, the all had similar, almost identical, tenets. There's a certain great irony here wouldn't you say? A women of great faith but a faith of orthodoxy and dogmatic practice leaving and then slowly re-discovering the real roots  that lay behind all the facades.

Continue reading "Are We The World? - Golden Rules, Edgeworth Box & God's Hand" »

Posted by dblwyo at 09:04 AM | Permalink | Comments (0)

The last several weeks continue to be eventful with Haiti continuing to occupy front page space and the nightly news & nightmares, the segue from the SOTU to the 2011 Budget to the conclusions of the WEF's Davos2010 conference who's theme this year was "rethink, redesign and rebuild". There were several central themes that reverberated which we need to dig into and revisit when we get back to looking at international affairs but a central one was a need to regain trust in government, business and leadership by improving performance and governance, and so rebuild trust. Here, here. This being Sunday we're going to focus on that issue because it threads across every session, the problems in Haiti and the problems we're having at home. You've all probably seen more than your share of images but CNN did this marvelous 360' short vidclip where you can pan the view. A word of caution - thes images are too tame because they're largely of a tent city not the devastation and injured. But even as the garden spot they're still terrible.

The Parable of the Stray

In some ways what brings such events home even more than terrible images is heartfelt words and here we look to the words of Haitian ex-pat poet Michele Voltaire Marcelin who's lament for the lost children of Haiti will bring it home. Equally she laments the deep fissures and breakdowns in Haitian society and governance, the legacy of centuries of malfeasance, and applauds the resilience and spirit of the Haitian people.

Were you ever walking down the street when a stray dog came up to you wagging their tail? Hoping for a handout but really looking for a friendly pat on the head and some sense of security and future. How many times did you reach down in pity and sadness to do the feelgood thing? 50%, 75%, 90%, all the time? One of our great epiphanies was the realization that the after petting the dog we'd have to chase them away. In fact the only person in this exchange who'd end up feeling good was ourselves, not the dog. Unless we were prepared to take them home, take care of them and nurture them for a long time. Instead most of us had our "moment" and walked on. Stop and think about that for moment or three. Our hearts may be moved to pity, we may write a check or we may text a contribution but are we really prepared to do for Haiti what needs to be done? In the long run?

Continue reading "Strays, Disasters, & Wars to Davos: Governance, Civility and Pragmatics" »

Posted by dblwyo at 03:46 PM | Permalink | Comments (0)

We're going to try and wrap up our series of discussions on Renewing America with this final post on the major cusp point we're facing. The central question facing us is whether we collectively opt to confront our challenges and work together to solve them. Or whether we let our not-so-better natures lead us into partisan politics and populist reactions that cause us to relapse into the behaviors that brought us to this point in the first place. Or worse, whether the impulses of our hindbrain so overwhelm the best thinking of our collective forebrains and lead to the reversal of over three centuries of growth and historically unprecedented prosperity. A record of achievement that has served as an exemplar for the world as being an active agent of (mostly) constructive change. Yet, at the same time, those hindbrain impulses have often been the very thing that has enabled us to cope with previous crisis.

The video clip is taken from "The Patriot" which, allowing for dramatic license, is not historically inaccurate. The hero is a Scots-Irish settler who organized his fellow backwoodsmen into an effective and fighting force that was one of the main underpinnings of America's successes in the Revolutionary War (the book to read is Born Fighting: How the Scots-Irish Shaped America by James Webb). But one of the things the Scots-Irish brought with them was an innate distrust of authority and government - largely because thruout 2,000 years of history governments had tried to exterminate them (the Romans twice, the English three times) and then betrayed them multiple times, after exploiting their qualities as fighters (the English again). That populist strain has become infused thruout America and is one of the main under-currents of our culture. The question would then seem to be what behaviors are appropriate in what circumstances and who's likely to pick what? There times when you need a tomahawk and times when you need to "reason together".

Continue reading "Confronting a Cusp Point: Renew, Relapse or Reverse?" »

Posted by dblwyo at 06:24 PM | Permalink | Comments (0)

Just in case you hadn't noticed we're facing a raft of challenges that will be barriers to prosperity for the next decade, and perhaps on into the next. Included among those are an economy that will have to make major structural changes, the need to wrestle with major issues in Healthcare, Education and Energy and a world that's evolving rapidly. At this point we're almost tempted to re-use Andrew Shephard's speech from the American President but figure you've probably heard it enough. The good news is that there are none of these problems that aren't solvable, in fact there are none of them that aren't being addressed. On the whole, about as well as they could be. The better news, in its own perverse way, is that the challenges are "minor" compared to the ones that we faced at previous cusp points historically; whether that was the GD and WW2, the Industrialization of America, the Civil War or the Revolution and the creation of the Republic.

There are two bad pieces of news however. The first is that our biggest challenge, common to all the big problems, is that we need to re-think and re-engineer our institutional framework. The second is that this will required patience, understanding and support from the population at large, in addition to leadership. Changing our institutions will be hard because it calls for re-invention of organizations that have grown up over a century since they were first created and they have accumulated lots of "plaque" and interests. Changing ourselves will be harder. The composite Gallop Poll pretty well captures the disenchantment of the American people. Of course there weren't polls to look at in 1860, 1880 or 1930 so what did we do for guidance then?

Continue reading "Renwing America 4: Time for Some Changes" »

Posted by dblwyo at 01:04 PM | Permalink | Comments (0)

We are a society of institutions - a large and complex society is too dependent on effective ones for its success, or lack thereof, as it is on any other factor. The institutions that govern our existence were created in the late 19tC and developed between 1890-1920 - and, by and large, haven't changed since then. In fact when you look at the modern University, the modern Hospital or any other major organization its roots lie in this period. That they are that "old" also means that they've been accumulating rules and procedures since then. Back then the populace could take it for granted that effective service, responsiveness and capability would result. Something we not only no longer take for granted but actively doubt. Sadly with fairly good reason. So there we are between a rock and a very hard place. We must have effective institutions to address the problems we must deal with yet the ones we've got are not longer as effective as they were. The questions are then why and what doe that tell us about what we can do about? Policy is merely good intention without results. Translation - in an odd way re-thinking, re-designing and re-structuring our modern institutions is the single most important domestic policy goal we have.

Looking Toward the Future: What We Need to Address

 In the last post (Renewing America 2: Institutions, Values & Performance) we traced out the path from problem to policy to operations to implementation and discussed the problems with the differences between civics textbook ideals and practical realities inside the sausage factory. We also suggested several directions to move forward on. Here we revisit on graphic and add a little detail for each level as well as list the major groups of barriers (assume that the Interest Groups, Partisans and Voter issues recur at each level).

We also suggest some specifics and add a little more detail here without going into engineering specifics. But, for example, the 911 commission found some 15 different committees have intelligence oversight and often issued conflicting guidance. When the Commission called for a more focused oversight no committee was willing to give up its powers. And we've certainly had a sterling lesson in how Congressional voting rules hamstring the legislative process. Every single major piece of legislation has had to be fought tooth and toenail thru the system in the face of bitter partisan and interest group opposition as well as a general lack of voter support (more on that later). What we want to focus on here is agency operations.

Continue reading "Renewing America 3: Re-thinking, -designing & -building for Performance" »

Posted by dblwyo at 06:47 PM | Permalink | Comments (0)

In case you hadn't noticed today is the first real working day of the new year, and depending on how you count it, of the decade. The last decade began with euphoria to the point of delusion-euphorillusion but quickly came aground against a series of challenges. It ended worse, as if you don't know that. We've managed to avert disaster and step back from the edge of the cliff but have the accumulated detritus of the decade that we must not only clean up but fix and move far beyond. Our last post expressed considerable optimism but accepted the depth and difficulties of the challenges. In our minds the central challenge is in changing our institutions and how they function. But just for starters you might want to review Rick Newman's list of four major problems we need to address. We covered some of that ground in the last post, or at least the readings; they are largely attitudinal but Mr. Newman doesn't propose ways of dealing with them (important as they are).

A while back David Brooks had a pair of opeds that discussed the "The Protocol Society" and "The God That Fails" that begins to. In the first when he talks about protocol he's really talking about the rules that govern our society, what the folks who study it call institutions. They can be formal, for example court systems, government or churches. Or they can be informal, holding the door for someone, norms of behavior and other rules of behavior. But they are the embodied and accumulated learnings from past experience captured in organizations and rules and they govern our lives.

Theory vs. Practice: Policy-making in the Real World

The path from voters wants and needs to new policy to actual implementation is governed by these institutions and it'll pay us to understand how they work vs. how they're supposed in the ideal world of your h.s. civics textbook. In the ideal world wants and needs are supposed to be translated by our represenatives into the best working compromise they can come up with and result in legislation. In turn that is turned over to the Federal agencies to be taken down into more detail and result in a set of detailed regulations to implement.

Continue reading "Renewing America 2: Institutions, Values & Performance" »

Posted by dblwyo at 03:31 PM | Permalink | Comments (0)

It's the New Year so we thought we'd take stock and look ahead, as so many others are doing. For the most part everybody accepts it's been our roughest decade for a long time, that it began with Trouble and ended with TROUBLE and that much of it was self-inflicted. While we agree with most of that, as you can tell by reading almost any post here, we also find ourselves strangely optimistic in general, for several reasons. Not for just emotional ones though that too but for substantive ones as well.

There's no denying that we have a lot of challenges and barriers in front of us, either. But, not to be too pollyannish about, the critical requirement is the heart of the people. We can choose to rise to these challenges or not. America has always shown a great deal of resilience, combined of course with a profound ability to get itself into position where that resilience is necessary. As a fellow sailor said about Lord Mountbatten, "there's no body better to be in terrible trouble with .... and nobody who'll get you in terrible trouble faster than Dickie".

So, can we get ourselves out of trouble here or not?

 The answer to that question is THE central issue we will wrestle with for a long time.

Continue reading "Renewing America 1: Hard, Doable and Necessary" »

Posted by dblwyo at 11:53 AM | Permalink | Comments (0)

An existential crisis is one that threatens the existence of the entity in questions - the Hudson plane crash was that for the passengers, WW2 and the Cold War were such for the US and the world order as know and love it. By those standards the current multi-part crisii aren't quite existential but in each domain (Economic, Foreign Policy and Domestic) we are faced with disruptive threats to the structure of the system as it exists. In other words if/when/as we get thru all this the nature and structure of the US and World economies will be radically different than what's evolved over the last 3-5 decades, the world system is being re-architected as we watch and key domestic policy issues (Education, Healthcare, Energy) that have been allowed to metastasize into systemic, disruptive threats by willful neglect have all reached cusp points. As existential as we care to get. Yet, by and large, in a few weeks a lot has been done to address them. The prior three posts were wrap-up and summary assessments for each of the three and were preceded by series exploring each. With the release of the new Star Trek movie everybody and their siblings have been using it to re-visit history, the culture wars and current events. Newsweek for example gifted us with this Star Wars vs Trek poster, which is both amusing and rings true (or truish). Jon Meachem, the managing editor, was on Charlie Rose the other night and gave his impressions of Barry after the first 100 Days. [A conversation with Jon Meacham] Pretty inside baseball stuff and it misses some of the key points which are critically important. Not least of which is not just the speed, force, magnitude and scope/number of major policy initiatives being put into place, nor how well the process is being managed or even - so far - how decently they are being implemented. What Meachem and the rest of the beltway observers are missing is the processes that are being used to apply rigor, logic, experience, multiple points of view and consensus building to arrive at pragmatic, workable and implementable solutions.

Revisiting the Policy Blueprint

 This particular graphic evolved to try and compress and represent the fundamental themes we face as a nation. It's genesis begins back in 2004 and it was put together almost three years ago. The point was that these were and are the changes in philosophy, policy and values needed to meet the existential challenges we faced... and still face. If you skim back over the prior readings you'll find that each one is being tackled, being tackled with a strategic policy that meets the test of being the best thinking that has evolved over the last three decades and is, therefore, the "right" thing to do. The readings provide current updates coupled with structural graphics illustrating each area in all of the major policy areas, politics and value development. While each deserives it's own series consider two key examples - mileage standards and Healthcare. The US auto industry has fought standards for years because it's profit-dynamics favored large vehicles while it gave ground to the Japanese. What's been needed is a set of national standards that reduce consumption, decrease pollution and avoid the expense of a single company trying to invest in multiple standards from many states. This legislation was put together over several months and is a consensus among the stakeholders, especially including the manufacturers, on how to proceed collectively. Similarly the biggest momenturm for HC Reform since 1992 has been built up and, as shown by recent industry payors and other players, it too represents a coalescing consensus that's been carefully built up in the public square. As opposed to be crafted by a small team in a backroom and forced down the throats of the polity, of Congress and the stakeholders. On all these fronts we have the best chances we've had to do something reasonable and constructive we've had in two generations. If they fail it won't be because the best we can think isn't being put on the table. Nor will it be because the right steps to building political support and putting workable implementation are being put in place. It'll be because narrow interests can't help themselves or because we haven't yet come up with the right mechanisms for implementation.

Making It So: Policy From Vision to Selling It

To get a new idea from vision to implementation there are several components that have to be put in place. First is the overall Vision - what principles, values and directions are suited to the time, which direction do we need to head, how do we judge ? Next is Leadership - or character, integrity, explanations (Voice) and delivery (making it happen; approach). Finally there are the wonkish specifics - what, where, when, why and how ? Especially mechanism ! Over the course of the last two years Barry started out focused on the Vision Thing while John-boy had some old principles lying around but was mainly focused on specific policies. As the election evolved Barry got more and more into details and strategies (his acceptence speech, his victory speech, his inaugural and every subsequent major policy speech could almost be a single book as they are consistent from beginning to end). Meanwhile JB retreted more and more to vituperative specifics based on old philosophies and shibboleths that were and are out-dated. Though he redeemd himself with a noble and public-spirited concession speech, as fine as anyone could make. His party on the other hand is turning out to be a bunch of angry, old white mean, I mean men, who are getting angrier and angrier about narrower and narrower concerns. Concerns where they are not only losing on each issue but are proving to be wrong, which is more important.

The Agora and Civitas:

Tolerance, Civility, Open-Mindedness & Public Responsibility

Having a different point of view is all well and good but it should come with two critical characterisitcs. A willingness to dsiplay tolerance for alternative perspectives and to reason together in resolving disagreemetns. And a commitment to abiding by the decisions reached in the public square - the Agora. At the end of the day we all benefit from a functioning public square and it is healthy if and only if we all exhibit civility, manners, tolerance and a commitment to it's health. Each of the last two administrations, in their own ways, contributed to the disruption of the Agora. Clinton by chasing after the latest polls and swinging with the wind, looking not for the right thing to do but the thing that would win. Bush by trying to force what he and his people "knew" was right and govern not for the good of the majority but trying to find the 50 + .01% that would allow them to force a decision. If you actually listen to President Obama's Notre Dame speech he's not insisting that he's right. Rather he asks for open minds and a willingness to tackle collectively difficult and divisive issues. And live with the collective decision.

So, at the end of the day, the pundits are missing the two most important things that are happening.

1) Each major policy decision is being arrived at by open dispute among the involved parties until the issues and alternatives are clear when a decision is arrived at.

2) The Administration is treating the public and it's opponents as adults who are open to discussing complex issues with difficult answers. And who are also willing to govern themselves with Civitas - that is with a sense of public responsiblity. MUCH more importantly we can slowly see the tenor of the debates change and evolve more toward a sense of Civitas - tolerance, open-mindedness and a willingness to roll up our sleeves.

Continue reading "Existential Crisis IV: the Agora, Civitas, Values and Futures" »

Posted by dblwyo at 09:33 AM | Permalink | Comments (0)

The last two posts were, in some senses, wrap-ups on the economic and international situations; they were couched in terms of the Agora - the public square and how it functions. A major purpose of the Agora is free exchange, that is trade and the economy, and the public square exists within the context of the relationships among states, hence the international part. Now we want to shift our attention to the third major aspect of the Agora - the behavior and rest of the lives of the citizens. In other words what goes on in the Agora besides "just" being a marketplace, or what is going on with Domestic Policy. Now that's a topic we've covered, in some depth before for it's own sake, as well as in the context of the role of key policies for the health of the economy (changing the game with regard to Education, Healthcare and Energy are sine qua nons of reaching a new plateau of healthy economic growth that's sustainable for example). But we have serious problems with these policies that will take serious people to solve them.

Why You Care: Long-running Structural Problems

Necessarily we all focus on our own day to day concerns and affairs, hopefully with a weather eye to how the winds and currents are blowing. Letting today's emergencies swamp all concern for the weather leaves us extremely vulnerable to boiled frog syndrome. Ignoring them entirely and taking a comfortable state of affairs for granted (that's not a lukewarm bath it the soup water warming up slowly) guarantees it. As we've hopefully made clear in the prior two posts we are crossing major cusp points in the economy and in the world that will shape the next decades as much as anything that's happened in the last six. One way or another they cannot be ignored - our only choice is cope or drift. Let's descend into wonkishness for a minute and consider another of the major structural trends, and remember this is just one of several major structural challenges we face. The top part shows the cumulative growth in the economy, consumption, investment and saving since 1948. The key thing to note is that when credit-driven consumption led to the relative demise of savings; in other words when immediate gratification became the dominant driver of our socionomic health. At the end of the day growth is jobs, income, prosperity and the well-being of our descendants. You can see the debt vs consumption link more clearly in the second sub-chart while the third comes full-circle back to growth, investment and savings. Growth has been gradually slowing down for many years until it went cliff-diving recently (NB: as badly as it's done in those six decades !). If we want to create a prosperous new future we need to return to being a nation of ants, not of grasshoppers.

Domestic Policy and Future Prosperities

Our first post on the health of the Agora took a fairly deep dive on long-term economic prospects, what it'll take from an economic policy point of view and what it'll take for those policies to work in terms of re-factoring crucial domestic policies in Education, Energy and Healthcare. In other words our future prosperity is utterly dependent on getting them right and making them work. There's a giant meme that's set into our politico-cultural DNA that government should keep hands off on everything, which is something of a natural reaction to the failed social engineering policies of the '60s. It also is neither realistic nor reflects the vital roles that are mandatory for government to play if we are to have a healthy society; it's also appallingly ignorant of history. Each of these topics require not just a post but books to properly dissect and, unfortunately we're still feeling our way thru on some key ones. Nonetheless government has a traditional role to play in defense and public safety as well as the creation and maintenance of civil society - which we've known about since the First Cities and continue to work on. A lot of folks think free markets came down from on high thru the immaculate conception but in fact they are a recent invention in human history and require their own institutional infrastructure. Government has also played a role in public investment that's vital to the health of any society from roads and bridges to China's Great Canal. For example modern capital markets were created by the Dutch and adopted and grown by the English. The entire notion of reliable financial markets (ahem) and public finance owes a great deal to England, Issac Newton, David Hume and others. The US government has played a vital historical role in jump-shifting US economic growth in investing in all our modes of transportation. And did you know that the entirety of our post-WW2 prosperity, over which we're now haggling, was based on federal investment in pre-war inventions that turned then into major new products, industries and jobs ? Markets don't work well for these sorts of good and are also prone to other systemic (that is self-caused) breakdowns as well as market failures. The classic example is pollution where no one company can afford to clean itself up if everyone doesn't. On a macro-scale modern economies are vulnerable to Black Swan breakdowns where the entire system implodes. We experienced one during the Great Depression and are in the middle of another, who's worst potential consequences appear to have been avoided. Another example is the role of publicly funded education - without the widespread adoption of free public high-schools the industrialization of our economy wouldn't have worked very well. And without extensive public health programs the urbanization that drove it was also infeasible. At the end of the day government is indeed vital - the question is finding the proper balances between public, private and civic policies and the mechanisms to implement them.

Getting It Right: Policy Mechanism

Many of the public initiatives listed in our shopping list are things that we've been working away at for centuries, even millenia and we've gotten to the point where we understand what needs to be done and how to do it pretty well. The area where we thought government could do everything led to a rather hubristic set of social engineering policies in the sixties that didn't go at all well however. And led to the Reagan Backlash as the limits of government intervention were reached and tested beyond workability. Now we've gone to far in the other direction, with obvious penalties. Friedrich Hayek arrived at the telling criticism of socialism and communism - if you attempted to determine policy across a large and complex society the efforts at data collection, decision-making, implementation, monitoring, control and enforcement quickly swamp your coordination capabilities and led to a rigid and ossified public policy. That's also what, IOHO at least, made the social engineering projects of the '60s unworkable. Yet the painful burns we've acquired by refusing to do what we've known needs to be done in Education, Healthcare and Energy, where we've literally been talking about fixes for three decades or more, makes clear that the ARE NOT SELF-CORRECTING problems. Which gets us to the fundamental challenge of implementation. In other words we need to set national policy congruent with our long-term goals and find the appropriate mechanisms to get people moving in the right direction voluntarily. Creating such incentives for individual decision-making is how markets work, when they work. Here we know they do not. What may be required - remember we're still feeling our way thru these new challenges - is national standards and funding combined with localized implementation and customization. If you look at the Big Three programs rolling out in D.C. you'll find that this is indeed the path they are taking. We'll be picking up on that thesis in the future with detailed dives into each. In the meantime we suggest you put to bed the "socialism" meme that partisan politics attempted to exploit to win points.

It's Time For Every Person

Horatio Lord Nelson's final general signal to his fleet at Trafalgar, which saved England and the modern world as we know it by their victory, was that "England expects every man to do his duty". Since we started with an Aaron Sorkin allusion we'll end with one as well. Here Ainsley Hayes, newly appointed to the White House Office of the Counsel is challenged on her motives.

"Is it so hard to believe in this day and age that some one would roll up their sleeves, set aside partisanship and ask, what can I do ?

What's your answer ? Whatever it might be let's hope the people in D.C., or at least the White House, agree with Miss Ainsley. Clearly many do not and put partisan victory ahead of duty to country. And duty to country is NOT blind - it doesn't require blind acquisence. It requires coming up with the best answers of which one is capable and makng one's best efforts to shape public policy. It then requires doing one's best to make the decisions reached  effective and successful - not continuing a constant search for advantage at the expense of the country.

Continue reading "Existential Crisis OF the Agora III: Fixing Things Around Home" »

Posted by dblwyo at 02:24 PM | Permalink | Comments (0)

Welcome to the "Brave New World", or as we like to call the land of reset. If you listened to the 100-day press conference we think the President did a decent job but not a great one, unlike his economic situation and policy review. Nonetheless, excepting the die-hard ideologues, this is a remarkable performance. And, in our judgment, an effort to find centrist, pragmatic and workable policies domestically, economically and internationally. In each of these areas thoughtful, informed, bold and potentially revolutionary policies have been put forth. An assessment put forth by a wide range of pundits (some of whom you'll find in the readings). We're going to try and take that apart a bit and look at what went on (though there's too much to review in ANY detail), what some of the assessments are and, our typical schtick, what the context and consequences are and how things will play out structurally. Setting aside partisan posturings the three major critiscisms that have been voiced (many by David Brooks initially and then picked up by others) are: 1) too much, to quick, 2) workability and execution (not in so many words but it is THE issue now that we're moving beyond ideological posturings) and 3) a radical shift in the line between the public and private spheres. All of them are legitimate, raise serious concerns and need to be addressed. But the bottomline here is that we're seen a remarkable 100 Days where critical markers have been laid down that set the tone, direction and strategies for most of the rest of the term and beyond. We are in fact engaged in an audacious reset at the most fundamental levels that will frame our outlook for decades. Perhaps most importantly we "Coach Carter" treating the voters like responsible adults and a slow shift in how they respond: from poll-driven policy-faking to principle-based decisions that try to balance what's best with with what's feasible and saleable. Now it's time to execute, execute, execute.

A 100-Day Assessment: Brooks, et.al.

In the readings you'll find selected excerpts and URL links to some of the more thoughtful pundits but so far the doyen and dean of reasonably balanced commentary is Mr. Brooks. Who, despite being a moderate conservative and a Burckian who worries about disrupting complex socionomic systems and unintended consequences, has applauded many of the decisions. For example calling the new Afghanistan policy bold but the war winnable or describing the economics speech as stunningly good or being dazzled and amazed at the sheer managerial competence of the Administration and how much they've managed to get done on so many fronts. We strongly suggest you invest the 30 min. required in watching the interview and taking notes because he covers an immense amount of ground quickly but insightfully. Some of the those major points deserve long essays in response. On the workability question we'll pursue some critical aspects later in policy focused posts but what Brooks and the others are missing is the repeated application of a systematic and systemic decision-solving methodology that seems to permeate each issue:gather the best people and ideas, pull them together, put a framework down, work out the details, start working the legislative process and selling to the voters. Review, revise,verify and extend as circumstances evolve.

Policy, Politics, Lizard-brains and the Disruptive Opposition

Let's get a little more analytical about some of the things swirling around. The accompanying graphic is a little busy but instead of building it up we compress several key ideas to that you can see how they all work together. Policy and politics have at least three key dimensions that must be addressed to be effective: what's the right policy, what constituencies does it impact and how do they react (the Political Spectrum) and how do you persuade sufficient support (the Mental Spectrum). Political interest combines the moderate and centrist leanings of the polity with the tendencies of party activists to retreat to the extremes while selling a policy has to balance the depth and density of information with the appeals to the hindbrain where decisions are really made. Clinton sold to the polls and told us what we wanted to hear - he got away with it because the times were good. Bush II told us what he thought we ought to hear based on his own ideologies. Obama is telling us what we must hear and not sugar-coating it. We'll see if the polity evolves itself enough to continue to respond constructively - so far there's more faith in the President than in his policies. We first used this chart during the elections and have modified to show how a centrist candidate (Barry) sold his intent while a wannabe centrist (McCain) retreated to the right and more and more appealed to the hindbrain. Now President Obama has gotten even more information-rich and is doing a fabulous job explaining things. It's not clear he's selling them - which is in fact one of the two major weaknesses he's got so far. That's not a problem that goes away until more pudding is eaten for proof however. On the other hand the Rips are retreating faster and faster into pure hindbrain appeals and bad policies. It's all very well and good to be "sincere" but right counts first and foremost and they're pushing shibboleths that were appropriate in Reagan's day, had a positive impact for a while but are badly outdated and deeply flawed. But instead of re-thinking themselves the True Believers are getting increasingly self-destructive. Too bad for them and ultimately for the country - a set of observations that roughly Brooks agrees with btw ! Ironically (cf. the readings, especially the assessment by Matt Miller) Obama's major initiatives in Healthcare, Education and Energy are closer to a combination of a) what Bush tabled in several State of the Union speeches (on Energy for example what's emerging is pretty close to his 2001 National Energy Strategy) and b) what other moderate Republicans have proposed over the last 20+ years. The Republicans, as opposed to the Rips, should be getting behind these instead of pursuing power and advantage at the cost of what's best for the country.

The Public Square: What Makes the Agora Work

Any society consists of a private sphere where people conduct their lives and make a living, a public sphere where the society makes decisions for everyone and a civic sphere where culture, religion and values define the ecology of the private and public sphere. If you go to almost any city in the world you'll find a public square which typically has shoppers strolling around, shops and commerce, public buildings and civic institutions (libraries, schools and churches for example). In Ancient Greece the called it the Agora - where all the myriad facets of the life of the city-state came together into one organic whole. Have you ever stopped to wonder what makes the public square work ? Like our mutual agreement that we have to have rules of the road so that we can operate our highways safely and efficiently we have to have rules that govern the Agora. Key among which is the agreement to abide by the rules, a recognition that they are necessary, tolerance for anybody who follows the rules to have the right to come to the square and be heard and a willingness to cooperate in it's creation, maintenance and safety. The public square has defined Civilization for millenia and, in it's modern, complex and gigantic form, it still does.

We've spent the last two or more decades abusing the rules necessary for the long-term health of the public square and damaged both the private and civic spheres as a result. Largely thru the opportunistic pursuit of various interest groups of their own advantages and interests at the expense of the general health and well-being. Now the question is will we all be citizens together and act in our collective self-interest to return the square to health or not ?

 Changes in Attitude: Paco vs the Consumer

This might be an odd sort of source to look at but Paco Underhill, who is one of the best consultatns and strategists in the world when it comes to retail and consumer behavior, was interviewed on the Newshour last week. He had a lot to say that was "ostensibly" about change in consumer behavior. But his critical observations and insights were really about whether or not we can continue to sustain our old behaviors. This economic crisis is forcing major and radical changes in shopping but Paco think the changes in attitudes are going to be permanent. We happen to agree. As points out - we can no longer afford to consume beyond our means. More importantly, fundamentally and even philosphically, we don't need to. Perhaps his most startling observation is that people need to learn, and are learning, that the next car or house or vacation is not only unnecessary. IT's NOT SATISFYING ! Now that's a SEE-change in our books. And when it comes from a guy who makes his living getting you to buy more and he's calling for changes in basic attitudes somethings up.

UPDATES: the Difference Between Pundits and Executive Responsibility

Here's the link for the CSpan: Obama 100 Day Press Conference and the post-conference Rose panel that discussed it. We were struck in the first case by how closely our assessment of things mirrored the President's directional intent while at the same time was reinforced by the pundits. BUT that's NOT the most important thing - THE important things are that the pundits don't talk at all about 1) whether the policies are right (which we've argued at length that they are), 2) what it takes to implement them (the question never came up among them) and 3) what it takes to explain and sell them to motivate the country in support of them. Yet as a matter of fact those are the central questions that must concern the Administration. The difference is between outside observers who've never stepped in front of the gun, even in a small way and the people who see dealing with all the elbow jostlers as just another part of their job but who's primary concern is getting it done, and getting it done right, workably and sustainably.

Continue reading "Peace in the Public Square: the 100 Days and Re-emergence of Civitas (Updates)" »

Posted by dblwyo at 09:40 AM | Permalink | Comments (0)

It's time to speak of many things, of kings, and cabbages, said the walrus. And speaking of things unless you've been hiding in the wilderness you've heard about Susan Boyle's stunning performance on the British Idol. Truly wonderful and a revelation. But beyond the singer and her voice one fascinating thing was watching the reactions of the audience and the judges - which we've tried to capture a bit here. But you need to watch the whole carefully as they move from snickers to shock to transformation to sheer joy. Amazing what's out there if only the opportunities are available, ain't it ? What she sang was "I Dreamed a Dream" from Les Mis, about the sundering of hope, ambitions and the cruelties of the world. Personally ironic but in light of the times we're living in more so for all of us. The question becomes what opportunities will we all have, what might be taken away and what do we do about it.

Economic Opportunities: Potential vs Actual GDP

One way to sneak up on those questions is to compare potential GDP - what the economy could produce at full employment, and actual GDP - what it produces when it's working at less than full capacity. The chart shows potential and actual real GDP per capita and they look pretty close from 1950-2008. Until you look at the differences between them ! Which is what the faint red line does while the heavy red line shows the trend. Notice that up until the late '90s things moved in a nice gentle cycle and then blipped up a bit. But the recent collapse is already more severe than anything we've seen in almost sixty years. And given that this downturn is going to go on for a while you can imagine where it will end up !

Dreams Indeed: Long-term Job Creation

One way to bring home the consequences a bit more is to look at the creation of new jobs which the next chart does. The light blue line shows new jobs quarterly from 1980 while the dark blue shows net new jobs. For the economy to grow, met growth in population and make folks better off we need to create a minimum of 450K jobs per quarter just to breakeven. Otherwise net new jobs falls behind population and productivity growth - and it is increased productivity that creates prosperity. When you take the running total over time you get the red line, which tells us more than we'd like to know about the health of the economy. For one thing it was poor with little real job growth thruout the '80s until the mid-'90s with only a little blip in the Tech Boom followed a very weak, jobless recovery that gained NO ground. And now - well judge for yourself - but it looks like a lot of folks will be singing "had a dream", emphasis past-tense, unless we do something. And that something is NOT just arresting the economic collapse or even beginning a recovery. It's putting the economy a path to new, sustainable growth based on new technology, new industries and new jobs. Which, as it happens, is exactly what the Administration has set out to do.

The Best Economic Policy Speech Ever

As it happens that President gave the single best economic and economic policy speech last week we've ever heard. He covered all the bases, talked about what got us into this mess, where we need to go, each major element of the recent spurts of activity and where they fit and how they all work together in a coherent and cohesive pattern that makes a whole greater than the sum of the parts. In particular he focused on why we need to act intelligently now with an eye on positioning ourselves for the future. If you click on thru the picture it takes you to the CSpan vidclip and we highly recommend you do just that. A while back, in fact several times, we listed out, discussed and analyzed the state of the economy and all the steps we saw, both on our own analysis and as a synthesis of the best thinking of a very wide variety of analysts and economists what needed to be done. Now there's a few green shoots (Green Shoots vs Self-Arrest: Back to Economic Realities (UPDATED)) that have shown up but we've got a long...long way to go. Some of the details are listed out in earlier posts (First Things: Financial Crisis, Economy and Barry, To Boldly Go Where We Must: Speech, Budget and Dr. Noes).

The shopping list of necessary economic policies is:

1. Find immediate and emergency fiscal stimulus through things like tax cuts, extended unemployment benefits and direct spending while

2. Keeping the wheels on the credit markets by injecting loanable funds directly but then we need

3. Substantive direct spending programs that should also not be simple consumption in disguise but improve the long-term performance of the Economy. Investment in Infrastructure perfectly fits that intermediate term bill. But then...

4. Invest in the creation of new industries that lower costs in the economy, create new technologies and new jobs. Strategic investment in Energy and Healthcare happen to fit that bill perfectly. And then...

5. Make sure enough people have the right qualifications - in other words we need to re-think how we deliver Education for the 21rst Century. Finally...

6. Quite wasting money on pork barrel projects driven by special interests and political manipulations and

7. Re-regulate the Financial Markets without destroying their creativity.

Now almost all of the markers are down and it's time to play the game - which means patience, persistence, skill and hard work. Fortunately all the right things are in place, unfortunately it won't be a quick or easy set of fixes because we've neglected things for too long and worse yet there are still major execution challenges. As the Zen Master Huitang said in Lessons on Leadership:

"What has been long neglected cannot be restored immediately. Ills that have been accumulating for a long time cannot be cleared away immediately. One cannot enjoy oneself forever. Human emotions cannot be just right. Calamity cannot be avoided by trying to run away from it. Anyone working as a teacher who has realized these five things can be in the world without misery". (Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country).

Sadly that was written well over 1200 years ago but then we're clearly a species that learns slowly when we learn.

Continue reading "Re-building On A Rock: Policy, Economy & Values" »

Posted by dblwyo at 05:10 PM | Permalink | Comments (0)

Peter Drucker had a famous and insightful saying (many actually): "change the people or change the people". In other words when an organization had to change to meet new circumstances and challenges either the behavior of the people had to change or you need to get new people on board. We can paraphrase that by in these times by saying, "change the institutions or change the institutions". This applies on the micro-level, for example with the re-regulation of the Finance Industry (Helmet Laws vs Adult Supervision: Re-Regulation & Finance Industry Futures), or on a macro and global scale. To get those changes however we need leadership for and from all the organizations and institutions who are involved as serious stakeholders. That paraphrase can be extended however and just how and when is best captured in the accompanying YouTube video clip. Either change the institutions or they will be changed for you, by a mob of angry citizens. Unfortunately history is not very encouraging as to the results. One cannot argue, for example that the 2nd French Revolution led to either permanent or constructive changes. Rather it seems to have continued a dysfunctional cycle in French socio-politics that still exists to this day. In a Charlie Rose interview Lee Kuan Yew, the founder of Singapore, made the fascinating observation that family ties and guanxi were so important in Asian socieites because they had millenia of surviving failed states and they only thing they knew to fall back on was family and social ties. AS the worldwide credit and economic crisis continues to metastasize into a worldwide social and political crisis it would be well to keep the alternatives in mind !

State of the World Economy

 If you look around the world there is no single country where trade hasn't literally fallen off a cliff. That ought to tell the whole story if you understand how critically dependent many, even most, of these countries are on trade for manufacturing, employment and general economic health. Whatever you think the situation is in the US the depth of the economic downturn is more severe in most of these countries. And threatens to drive many of the poorer ones over other kinds of cliffs. That drive will lead over a third precipice - profound socio-political instability that could strain many of these governments to the breaking point. Something they are all well aware of. With the upcoming G-20 meetings the question then becomes how will they respond ?

Trade is the Lifeblood...and Credit the Oxygen

We can say that but it's not entirely clear it has emotional weight to most, including ourselves. Let's consider an analogy. Consider the human circulatory/respiratory system that takes air and food from the environment, processes it, turns it into cellular structures and then carries those to each and every location in the body where complex, large-scale and very fast bio-chemical interactions enable us to breath, burn energy, build new bones, muscles and other tissues and, in short, exist. Not enough food and we begin to waste away, literally eating ourselves up. What allows for that food to be burned up is the oxygen in the air. Well trade is the analogy of food and the energy it contains while credit is the air that fuels the fires.

Where Are the Adults ? Into the Valley of Decision

When the crick's rising to fast, the food running out and there's a fire in the school we can either all pull together or we can run around in circles, screaming, shouting and pointing fingers of blame. And we can look to our leaders to step up the challenges of putting out the fire, organizing the dike repair teams, buying food from other regions and then making sure enough is saved out for Spring planting while also changing the engineering of the dikes and creating a  fire department when we didn't have one. The upcoming G-20 meeting was supposed to be the opportunity of the key world leaders to step up and do the right things. Unfortunately there seems to be an extremely limited supply of folks acting to both quell the emergencies, repair the system and start the process of evolving a new and improved one. Actually, broadly speaking, the folks acting proactively and correctly seem to be limited to the US, China, the UK and Brazil while the erstwhile leaders of the EU still seem to be in profound denial and Japan is rocking from one political breakdown to another. When you add those up you've added up the bulk of the world economy. On which the fate of all now rests. What was that about interesting situations ?

Unfortunately the number of self-responsible adults let alone the ones willing to take public responsibility seems to be very limited even in the countries who are leading. Pundits to the left of them, politicians to the right, challenges in front, still into the Valley of Responsible Decision-making rode the six hundred (600 ? Really). With all apologies to Tennyson !

That's hardly our sole assessment, btw. In the readings excerpts you'll find everything from state and outlook on the world to key oped pieces by Steve Perlstein of the WaPo and David Brooks of the NYT to the first in a series by the Economist on re-thinkings of global capitalism. We particularly recommend the Martin Wolf Rose intereview and the Perlstein/Brooks pieces. As well as the Yellen situation summary and our own prior posts on the situation and the realities vs the politics.

Continue reading "Sounds of Angry Men, Whimpering Politicians & the Global Crisis" »

Posted by dblwyo at 08:40 AM | Permalink | Comments (0)

We're going to circle back to the US and take up the state of the economy, economic policy, policy vs. politics and partisan political posturings and try and braid them together into a single rope of investigation. At the same time we are NOT leaving the topic of the state and outlook of the world because, as we argued in the first foreign affairs post in this series the US's role in maintaining and re-developing a new international system is critical and indispensable. And central to that role is the success of economic policy without which both the US and the world will face severe difficulties. In the readings we cover a lot of ground, as usual admittedly, starting with a survey of the state of the economy and real nature of proposed economic policy instead of what the headlines, pundits and partisans are telling you. If you read nothing else click thru and download Paul Kasriel's two essays on what did work in fact in the Great Depression (The Great Depression – Just the Facts, Ma’am) and on what role savings and investment will play in future growth (Paradox Squared). Then we shift to what the real challeng is - IMPLEMENTATION ! Then we segue to the partisan catfights where old shibboleths of the '80s are being revived to counter these policies when the facts on the ground  have changed ("when the facts change I change my mind. what do you do ?"). Finally we finish up with some readings on re-imagining what the new world could/should look and why a return to fundamental values revived in new clothes are essential to making this all work !

To summarize our main points however we'd say: 1) the economic situation is very serious but fixable and we have strong historical evidence, 2) the biggest challenges are implementation AND laying future foundations. On the latter the Administration is doing many right things on the former it's early to say. However, 3) partisanship is proving to be a poisonous legacy, 4) the American people still haven't grasped the Administration's direction at a fundamental (gut) level and 5) the biggest danger is the knife-edge balances between impatience for what will take time, effort and perseverance against the all to real risks of backlashes, anger and a radicalization of American politics. Then all bets are off. We take our socio-political stabilities for granted but what happens if they aren't a self-renewing gift from past generations ? Then we're in for the same kinds of troubles that are threatening other nations !

Economic History Realities

 Take a look at this composite chart from Kasriel of Northern Trust, which dissects the realities of what what on during the 1930s. The UL corner shows real GDP changes from 29-39 and that a recovery was actually underway. In fact when you net out Gov't spending it was in the core economy; that is there's a pretty good chance it was internal and organic. The evidence is further strengthened by looking at the significant improvements in Employment that took place in the middle '30s. Now look at the last sub-chart in the LL corner which shows the increases in Gov't spending. It turns out that this was the priming that got the pump going. And when "religious" orthodoxies prevailed the Depression resumed ! Despite the nay-sayers it is possible to re-stimulate the economy, you have to act early, forcefully and with enough resources. You also have to sustain until full health is restored. Fortunately for us the financial system is not anywhere near as frayed nor is there a complete absence of social safety nets. So there's no way this'll be anywhere near as bad but unless we act well and hard it'll get a lot worse and things are going to say fragile for a long time.

 Current Economic Legacies

Now let's look at another chart set that traces out the situation in the US economy and it's evolution over the last several decades. The top sub-chart shows the cumulative % change in GDP, Corporate Profits and the SP500 from 1950 to now. This is another one of those "simple" charts which tells us, when properly decoded, a profound human story. Notice first that they moved in lockstep until 1995+; in other words there was a natural, structural linkage between prosperity, profits and stocks for almost five decades. Which was broken by the Tech Bubble of the late '90s but investment-driven speculative bubbles are endemic to market systems. More interesting is the surge in Profits in this decade which appears to un-grounded in the underlying economy. If you look at the second sub-chart you can see that "bubble" highlighted. Now we know that much of these profits came from the Financial Sector and were built on houses of cards and sandcastles. In the non-financial world they also turn out to be built on reduced hiring (this was the weakest post-war job creating "recovery") and reduced capital spending. Both symptoms of corporations not investing in growth because they couldn't find the opportunities. Bear that in mind - economic growth is the sine qua non of prosperity and socionomic well-being. Back to the first chart for a minute when things were saner notice the markets did well in the '50s and '60s relatively and under-performed from then until the mid-'90s ! In the bottom chart you see the shares of national income that went toward Profits, Wages and Capital investment. Thru the mid-'60s Wages and Profits did well together while capital spending was stable. Then the piper wanted to be paid and wages and profits dropped during the "malaise" while capital's share went up to help deal with the shift to a less-energy intense economy. Since then it's re-stablized but wages have deteriorated, with the excpetion of the late '90s boom. Profits alone would appear abberational. There's probably a lot of complex factors but we think one is central: during the '50s and '60s we were enjoying the stable and sustainable growth from new industries in a stable political environment. Unless we find new sources of growth averting this current emergency and returning to a more normal business cycle WILL NOT fix these long-term problems.

Unintended Consequences

 Consider this interesting little chart which summarizes the Unintended Consequences (UiC) of our decades-long neglect of finding successful policies and politics in several key areas. Including Energy, Environment, Education, Healthcare, Welfare and Retirement. Strange how that chart which is close to two years old at this point so closely resembles the Administration policies being put on the table to address our long-term needs to re-vitalization. For each of these areas a detailed examination of a policy, or it's lack, would ask "what next ?" several times.That is what's the initial proposal, what incentives does it create, how will the various stakeholders act and what are the longer-term ripple effects. For four of the major areas we provide our summaries of where stood and where we stand; again the proposals on the table seem like they were all tailor-made to address these concerns. And, if you believe the implications of the prior discussions about the need to balance and integrate short- and long-term policies represent areas that MUST be successfully addressed.

Speaking of Stakeholders

Which means the stakes for all of us are pretty serious indeed, if not as serious as they could become if things don't go well. Which leads to the natural question of how are the various stakeholders acting - responsibly as concstructive citizens ? Or otherwise and pursuing their own narrow agendas ? Now in my book there's clearly enormous merit to almost all the proposals on the table and each of them have flaws. Those flaws are natural to the speed, size and complexity of what's involved as well as the messiness of the political process. We can't reasonably nor legitimately expect the various stakeholders to sacrifice all their own interests in the pursuit of some vauge national agenda dictated to them. We can expect them to balance the two and, where they have grounded and legitimate disagreements, provide critiscism and suggestions. That in fact is one of our acid tests for the loyal opposition. By their own lights are they trying to make things better ? A second is are they balancing partisan advantage reasonbly well with broader interests in the light of how things are going ? Finally a third is are they right ? A friend has rather strenously objected to some of my previous characterizations of the Rips as being almost entirely and narrowly partisan. The counter being that they are sincere in their objections. That may be true as it's hard to judge the inside of someone's heads. But my counter-counter is that even if they are they fail the tests of not offerring up constructive critiscism and contribution. And blind opposition is not in their own best interests as it paints them as part of the problem. Those are observables. But the most important thing, after much reflection, that I come down to is this. Sincerity when you're wrong and making no effort to test and validate your ideas doesn't count. Let me make a terrible and odious comparison. The Khemer Roughe were entirely sincere in their ideological purities that led to genocides. As was Mao during the Culutural Revolution or Stalin in his purges and collectivizations. Yet millions still died while they were field-testing their ideologies. If the best available evidence, thinking and analysis indicates your ideas are wrong while the best available history suggests they've been tried and failed it's time to come up with new ones. And be a constructive loyal opposition instead of a destructive collection of nay-sayers. So Mr. Wizard, just how would you go about this ? And why should we believe you ?

Continue reading "Back in the US: Economic Realities vs Partisan Posturings" »

Posted by dblwyo at 01:47 PM | Permalink | Comments (0)

The big news from the last couple of weeks, at least domestically, is that we've succeeded in crafting and passing the largest peacetime suite of economics legislation in our history (the Stimulus Package plus the next round of TARP) with more to come as the other two legs of a 4-legged stool. Those being a Housing rescue package and a re-formulation of Financial Industry regulation. We also learned that the ME is not the only place where intransigent adherence to provably wrong shibboleths of policy, position and belief are rampant. Nonetheless the package is un-surpassed for size, scope, force and timeliness and as such gets a B+ on economics, an A- on politics and an A for pragmatic and realistic policy-making craftsmanship, admittedly grading on a curve. What do we mean by all that ?

Economic Policy to Date

First, make absolutely no mistake about it. This package is absolutely essential to saving the economy. We're in a very serious situation where the liklihood of a more pronounced downturn followed by a decade or better of Japanese Malaise is entirely possible. Further, the economy is unlikely to recover on it's own because the normal, organic self-correction mechanisms are broken. People and companies are, were and will be continuing to pull in their horns as the situation deteriorates; government is the ONLY possible source of the spending necessary to salvage things. Second, in a short-term view the notion that OMG it's spending is just utter and absolute nonsense, that in fact is the whole point. It doesn't matter if gov't employees steal everything and go to Vegas - it's still stimulative. Third, there are real tradeoffs between tax cuts (which are fast but don't give you much bang, direct spending which gives you a much better multiplier but is slower and investment, e.g. infrastructure, where you get the most bang but is much slower and complex. For example investment in new energy sources doesn't do much good if you haven't the power grid to move the new power. Fourth, given the spending if you can use some of it to both get high multipliers AND lay the foundations of downpayments in future improvements in the economy that's smart policy-making. Finally, this is a large, very complex under-taking for which the implementation mechanisms are lacking; as a result there's only so much spending you can do in certain timeframes and you need to build up your capabilities. You also need to get support and buyin. Taken all together the package is a very well-crafted balance among all these competing requirements, let alone in the time and with the ideological oppositions it faced. We've gone into some of this before (First Things: Financial Crisis, Economy and Barry) but if you'd like some more details try these more "technical" discussions (State of the World: Crisis Metastasis, Strains and Fault Line,Economy vs Earnings Cage Match: Outlook, Business Performance & Realities ???,Time, and Past to Play Bizzball: Economy to Business Performance).

 Let No. 1 Speak for Himself

If you don't entirely grasp the size and complexity of the package check out the accompanying graphic from the WaPo which shows how it's balanced across the major components and how those components break down across the various Departments and areas as well as across time. And if you think pulling that off in the timeframe with that good a design was an accident, or that all the talking heads echo-chamber discussions of how badly things were done is accurate here are some excerpts from the recent AFOne Chicago flight of an on-record interview with the President, again from the WaPo.

Obama Interview Transcript

1. Almost to a economist, there was a consensus that we needed a large stimulus package not as the silver bullet to solve our economic problems, but as a necessary component to solving our economic problems, and in terms of scope, that we were going to need something between $600 billion and $1.3 trillion. That was the range that was presented to us. There also was consensus among economists that the best approach to spending that much money and getting the stimulus out of it was to diversify a little bit, so have a tax cut component -- there was a generally strong feeling that tax cuts targeted at people who were most likely to spend would have the biggest impact; a state fiscal relief component, or a countercyclical spending component, so everything from -- food stamps to unemployment insurance -- again, stuff that would be spent out quickly and, in some cases, help prevent a worsening of layoffs and a spiral downward. And then a third component of infrastructure. Now, each of these components had pluses and minuses. For example, tax cuts, you can get them out quick, but the general view is that you don’t necessarily see a dollar of spending by consumers for every tax cut they receive. Infrastructure, you get probably the biggest multiplier effect -- for every dollar you spend you might get $1.5 worth of demand out there, but necessarily you can’t get all those infrastructure projects done within a two-year time frame and the start-ups may be longer. So our whole goal was to provide a framework for Congress that presented the best mix based on the best available information that we’d gotten. I raise this because I think that some of the critics ended up fastening on this pet project or this program that they suggested was not stimulative; in fact, it would be hard to find economists who would argue that the guts of the program, the core of what just passed the House and hopefully will pass the Senate while we’re in the air or shortly after we land is not pretty well designed to get the economy moving again. And one last point -- one last goal that we set out, and that was if we were going to spend this much money, our number one priority being to get jobs in place and to get the economy moving again, wouldn’t it also be helpful for us to make sure that we laid some made -- that we made an investment in longterm economic growth -- that we put a down payment on things that have been deferred for too long?

2. Now, in terms of what I’ve learned on the politics of it, I think what I’ve learned is that I’ve got a great team because we moved a very big piece of legislation through Congress in record time. And that was not easy to do. And I think the end product is not a hundred percent of what we would want, but it is a very good start on moving things forward. I made every effort to reach out to Republicans early to get their input and to get they buy-in. I think that there were some senators and House members who have a sincere philosophical difference with the idea of any government role in boosting demand in the economy. They don’t believe in Keynes and they’re still fighting FDR. And no matter what we did, said, whatever the process was, they just don’t agree that this is the best prescription. And I think we can disagree without being disagreeable on that front. I also think that there was a decision made that was political and tactical on their part where they said, you know what, if we can enforce conformity among our ranks then it will invigorate our base and will potentially give us some political advantage, either short term or long term. And whether that’s a smart strategy, I think you should ask them. The last point I would make, though, is that given the urgency of the situation right now, my consistent goal throughout this process is: Are we getting the most immediate, most effective relief possible to American families who are losing their jobs, losing their homes, losing their health care? I welcome Republican participation in that process, but ultimately I’m answerable to the American people. And my determination was to get it done, and I think that we’re going to get it done.

3. Look, I mean, the fact of the matter is, is that once a decision was made by the Republican leadership to have a party-line vote -- a decision that I think occurred before I met with them -- then I’m not sure that there was a whole host of things that we were going to do that was going to make a difference. But again, my bottom line was not how pretty the process was; my bottom line was am I getting help to people who need it. Going forward, each and every time we’ve got an initiative I’m going to go to both Democrats and Republicans and I’m going to say, here’s my best argument for why we need to do this. I want to listen to your counter-arguments; if you’ve got better ideas, present them. We will incorporate them into any plans that we make, and we are willing to compromise on certain issues that are important to one side or the other in order to get stuff done. There are 535 members of Congress; they’re not potted plants. Their job is to represent their constituents and they’ve got ideas, too. So I’m not interested in bulldozing them. On the other hand, I’m answerable to the American people in an emergency economy. And what I won’t do is to engage in Washington tit-for-tat politics and spend a lot of time worrying about those games to the detriment of getting programs in place that are going to help people. : Well, look, as I said, I don’t want to question the sincerity of some of the Republicans who opposed this plan. They just may have a different theory about how the economy works. Now, I have to say that given that they were running the show for a pretty long time prior to me getting there and that their theory was tested pretty thoroughly and it’s landed us in the situation where we’ve got over a trillion dollars’ worth of debt and the biggest economic crisis since the Great Depression, I think I have a better argument in terms of economic thinking. But, again, I don’t question their sincerity. I do think that over time, as we keep on reaching out, and as I think the American people express their view that we need to start actually doing something about jobs, housing, health care, education, and so forth, that there will be some counterveiling pressures to work in a more constructive way.

4.I don’t have a crystal ball, and I don’t think anybody does, but I think that you can imagine very easily a scenario in which we duplicate what happened in Japan in the ‘90s, where we paper over core problems in the banking system. Despite some efforts at stimulus, we never fully get private credit flowing again, and the economy contracts severely and then sort of limps along for a very long period of time. Keep in mind, though, that even in that scenario, Japan had an awful lot of foreign currency reserves, they had a surplus from a positive trade balance. And the United States was pulling a world economy along. In this situation you’ve got all the economies around the world, even including China, decelerating at a fairly rapid rate. So if what happened in Japan is duplicated here in the United States, there’s nobody else to help drive the engine of growth, you could end up seeing an even more protracted and prolonged worldwide contraction. And I think that would have a severe impact on our quality of life. Let me, first of all, emphasize that the recovery package was critical to help families right now. Unemployment insurance extensions, health care through a COBRA that’s affordable, some immediate job creation -- those are very important. That’s only one leg of the stool. As I said in my press conference, the second leg of the stool is getting credit flowing again. And what the first round of TARP accomplished was to avert potential -- I hate to use the word again, but potential catastrophe in the banking system. I mean, things could have melted down much worse. Because of a lack of clarity, consistency, transparency, what you didn’t see was a market rebound and credit moving the way it needs to. So the credit markets still are not functioning the way they should. Now, this is a hard problem, and that’s why I said, I think on Nightline the day that Tim Geithner spoke, there are certain market participants who think that there’s some painless, quick fix here. There isn’t. Because what happened was that you had banks making bets, leveraging $30 off of one dollar of subprime assets; that was duplicated throughout the system, and deleveraging, sort of working through all those bad debts is going to be really tough. Now, we started talking about this, by the way, in transition as well, and so along parallel tracks, even as we were working on getting the recovery package done, we were also talking about how do we get credit flowing to home owners; how do we make sure that we’re getting small businesses the resources they need; how do we make sure the banks trust each other in terms of lending, and even blue-chip companies are able to shed corporate debt, so they can make payroll and keep people working. 

 Bottomline Assessments

 Think of this as the New Coke marketing paradigm - even if you screw up you gain because you've ranged and bracketed the opportunity.
 
1. Barry reached out to everybody and included major chunks in the plan strictly for compromise, that is the tax cuts, which we know are NOT that efficacious in this regime.
 
2. He and his team guided things in the background but rested the primary responsibility for Congress and let them do their thing.
 
In both cases we learned they aren't up to the task, still thinking in old patterns and (especially the Rips) reverting to old posturings and shibboleths; the talk show appearances sounded just like Newt the Grinch's playbook from the mid-'90s on perjorative labeling to trigger the lizard brain. McCain did too. And btw it was the same rhetoric that lost the election for him.
 
So what did Barry do so far...he
 
3. Kept his cool, didn't get trapped into we said/you said, and pointed out it takes time to change people's habits thought, especially when they're burned into the deepest levels of their lizard brains.
 
4. At the same time in the press conference and at Elkhart he fired several major warning shots that said he can't afford to tolerate to much childish behavior before being forced to get out the leather strap.
 
Chess master indeed. And playing not just for the Opening or to set up the Middle Game but begin to set up the positional game for the long-run. And AT THE SAME TIME taking a very long, patient and balanced view of how you work in the short-term but play to change the tone without getting trapped in the emotionalisms and posturings. Unlike almost everybody else in the game.

We'll see in that short-run how the messaging and positioning works out - that one he may have lost by losing some of the skirmishes but this battle isn't over. Let along the campaign. In fact if you'd like a baseball analogy much of the critiscisms have been about the base-running and sliding while ignoring the hits, runs and errors, let alone the season or the balance of forces. As it happens less than 1% of the bill is characterizable as "Pork" but the Rips played the old pejoration labeling games invented by Newt the Grinch to go after Clinton that have since dominated political discord, oops, I mean discourse, in this country. For a prior dissection of Lizardbrain vs Substantive communications see this (Rope-a-Dope at Hofstra: Handicapping the Debate and Results) and then compare it to the Meet the Press vidclip. Better yet compare that vidclip to this book talk by psychologist Drew Westen and look for the labeling vs non-labeling appeals to the lizard-brain.

IOHO they've made major strategic and tactical blunders for narrow partisan advantages that may in fact be cynically self-serving, with an admixture of sincere disagreements (despite all evidence to the contrary over almost thiry years of Supply Side debates). In any case listen to the posturings on some of the vidclips in the readings (of which there is a whole......le bunch covering the spectrums of political, policy and posturings concerns). Or check out this series that provides a window on how well they sold the PorkFest Messages.

Continue reading "Miracles on Pennsylvannia Ave: Make it So, No. 1 !" »

Posted by dblwyo at 05:24 PM | Permalink | Comments (0)

There's a fairly well known cartoon of two scientists working out a problem on a chalkboard covered with complex equations and down in the corner is a little circle with the key step inserted in small print - "and then a miracle occurs". Wouldn't it be nice if we could take the same short-cut to fixing the horrendous shopping list of significant challenges we all face ? There's another sort of urban myth that the Chinese character for Crisis is composed of the two characters for risk and opportunity. That pretty well describes our situation - so much so that it's becoming a semi-common theme among the commentariat. Which doesn't stop it from being very....very accurate. We've muddled along for the better part of two decades deferring action on key strategic initiatives from energy to healthcare to education to the economy because the apparent cost of fixing known problems was far greater than the experienced pain of hunching along. Fortunately for us we're no longer in that position. In prior posts (Populist Panderings, the Candidates and Real Solutions, Hit the Decks aRunnin...Git 'er Done Barry, Changes and Challenges: a New Year Unlike Most Others) we've inventoried and analyzed what needs to be done, how the incoming President is approaching things and the major barriers to finding daylight to run to. Now it's time to knuckle down and get 'er done, starting of course with vital steps on short-term economic fixes to lay the groundwork for long-term solutions (First Things: Financial Crisis, Economy and Barry) that put us back on a growth track. With all that in mind let's consider what some of those long-term steps are and how they inter-act.

Strategic Economic Policy

Presuming we get thru the next two years of continuing economic crisis and get the economy back on track the real challenge we'll face (we should be so lucky) will be to get the long-term structural trend of the US economy headed upward again. In a nutshell that means creating enough new high-value jobs so that the average worker can find one with a rising income. Conversely that worker has to have the necessary qualifications. Taken all together there are a lot of moving pieces which need to work together as we've tried to show in the accompanying graphic. There was a day when P&G was an innovative growth company because having a clothewasher was a big new deal. In other words the right kinds of new jobs come from innovation in new products and industries and we need to look at Energy, the Biosciences and Materials. Imagine new solar panels that are cheap, affordable or new biologically derived bacterial production of alternative fuels and you get the idea. Our ability to do all that is dependent on establishing a secure and peaceful world where we minimize the impact on the environment, not end up in a series of on-going conflicts over water rights, oil or other resources.

Strategic Domestic Policy

 Contrary to current popular belief nobody has come up with any better way to feed, house and support more people more effectively than a free-market economy. Contrary to dead and dying shibboleths however nobody has come up with a way to have efficient markets in a vacuum. They require a legal system, secure property rights and a certain sense of peace and security. As all to many places around the globe show by terrible counter-example right now. Which really means we need to find the right balance of government regulation to let markets work well where they do and constrain them within those limits...and that's not just an observation about the Finance Industry, our current poster-child of run amok self-interest. It also applies to health, safety, the environment and on and on. So finding the right mechanisms and designing new generations of public institutions that provide the right incentives for the kinds of behaviors we want is a critical dependency we need to address. Oddly enough if you look at the prior posts where we inventory and analyze the range of domestic policy challenges in Education, Healthcare and so on as well as the institutional barriers to success we come full circle. If we want to reform Healthcare or Education we need to find a way not just to have nice ideas about what we'd like to have. Or even constructive ones about how we'd like to implement those ideas. Instead we need to create the incentives that get us the most bang for the buck ! Consider Healthcare for example - the 46 million people who are un-insured don't necessarily lack some health coverage per se. If they show up at a hospital they'll be treated. Which means the folks who are paying insurance are subsidizing them. Done that way we're probably paying 2-3X what the real cost of providing good care for everyone would be. We could work our way thru all our other key areas of concern and likely reach similar conclusions.

The Will and the Way

As usual we'll end up circling back to a point we keep re-discovering. At the end of the day a lot of this turns out to be up to us. The reason we drifted thru the '90s until we ended up facing this decade's terrible consequences is that nobody was willing to change. Now we'll find out if the troubles are serious enough to get from MEISM to WEISM.

So how do we work smarter instead of working harder and harder just to keep falling farther and farther behind ? Again the answer - build the right kind of incentives to get everybody to act in our collective interest rather than maintain perverse incentives where everybody chases only their own narrow interests. There's lots more to it than that of course but much of the technical details we already know how to do - there's no invention required. What we've lacked is the will and the way.

Continue reading "Blocking, Tackling & Running: Leveraging a Crisis Into Real Change" »

Posted by dblwyo at 02:21 PM | Permalink | Comments (0)

The latest Real Clear Politics poll has it like this: Barry 46.3, John-boy 43.7, Difference 2.6(B). Not much of a gap and one that's narrowing, even after the triumphal world tour. We'll have to see how things play out of course. Every "objective" indicator from dislike of Bush, to the state of the economy, to accelerating voter anxiety about the future to the successes in Iraq would favor Barry. What's going on here ? Well some of, if not most of it, is the dilemmas and lack of clarity we already discussed (Moral Clarity ? Good Intentions, Muddy Proposals, Directional Obscurities). And the cartoon, puts it in perspective. A caveat - while the cartoonist probably intended to take a shot at Barry IMHO it applies to John-boy as well, just differently.

My bottom line is this - we have a pretty clear grip on the major policy challenges, both here on the blog in some depth and analytical fashion and among the general public. Who may be less analytical but has a darn good grasp of what the real challenges are. Where the rub's turning into pain and how serious it is. What we don't have a clear grip on is what either candidate is proposing to do about it. Let me wrap a couple of pictures around that, just for fun, illustration and to riff off of.

Policy Directions

First, just as a reminder and to frame the discussion, here's how we see the major policy challenges. And our recommendations for strategic directions to follow to dealing with them - basic or fundamental principles if you will. Now the categories and descriptions got built up out of the way things work - reality as best we can judge - and the way people end up thinking about these things, even when it's not so crisp. The directional recommendations are what our analysis suggests offer the best and most workable objectives to pursue at a high level. But of course the devil's in the details.

Candidate Evaluation

So how're the candidates doing against the blueprint ? And how will/are people judging them ? The next picture we put together to try and frame those question from a couple of direction. As the last post discussed (Rational Voters, Public Choice, Economics and Futures) nobody's got the time or resources to do detailed evaluations on all the issues and alternatives, the candidates and their non-existent proposals. So we all tend to the next best thing - judging on Vision, Leadership and Policy Principles. More or less - and it's not a bad way to go. If you combine that list with the policy principles blueprint you might end up with something like this. And apply it to the two candidates you might end up with the two-color triangles. Which aren't entirely fair but heh, what'd you expect for free graphics. But aren't entirely inaccurate either - Barry is a lot stronger on the Vision thing but sure seems to fade out fast on anything below that. On the other hand John-boy gets to down to brass tacks on a few things where he's comfortable (his paint scheme should have been spottier for sure) but sure fades fast when trying to explain how he sees it all tying together. If Barry is running on eloquence John-boy's running on true-grit and track record and both might just be running on empty.

As Good As It Gets ??? Where's Ronnie When You Need Him ?

That's a complaint, not a diagnosis and not a treatment for sure but it may be as good as it gets. Going back to the "Policy Principles" chart we're in a world where there are major structural changes in every category. It's a brave new, multi-polar world where peace and love haven't broken out but there are major rising powers who need to be incorporated constructively into some new system. Meanwhile we're experiencing major structural shifts in the economy which is making people legitimately anxious about future growth prospects. And it's also leading to major pressures on society that are making people less comfortable with the old American verities. The only good news IOHO is that the culture wars have been back-burnered as the seriousness of these challenges mount up. The last time we faced a range and depth of problems this severe was in 1980 when we had an imploding economy, a failing foreign policy that was losing the Cold War and a mounting backlash against the failed social engineering of the '60s and the associated libertinism attacking our core historic values. And Ronnie managed to step forward, calm everybody down by offering a vision for the future and specific action plans that did address many of these problems. In a small way he shared Lincoln's abilities in finding simple explanations for complex problems and converting them into convincing stories. But also for the record he was badly wrong about much of his economics and we're still living with the consequences. On the other hand there was a lot he was right about; for example he and Volcker broke the back of inflation and restored a growing economy though supply-side turned out to be voodoo economics indeed.

In other words he had a VOICE - he could tell us straight out what he thought was going on and what we ought to do about it, in a way we could understand and find convincing...or not.

 Voice and Leadership

And therein lies the problem - neither of the candidates has found their VOICES as yet. They haven't come up with simple, clear and compelling explanations of who they are, what they stand for, what they think we should do and how we should go about. That's it in a nutshell.

But let's set the record straight. The scope and seriousness of the problems we face now are not anything like the ones Reagan faced and those were nothing in comparison to what we faced at prior major turning points in the history of the Republic. So let's everyone get a grip - we got thru those. Maybe not with style and grace but overall not ineffectively either. We'll muddle thru these somehow as well - if nothing else by definition. The question then becomes will we like the outcome ?

Part of the problem is that for a long time politicians have been successful telling us what the think we want to hear because we haven't insisted on hearing painful truths. Well the fact of the matter is that the world is what it is and we're in a better position, now and for decades than almost any other entity. But there are serious challenges. The one of most concern is the economy and there aren't any magic answers, there especially. Most of the problems we face with regard to the Economy, and the associated problems with Energy and Education are the result of deep structural flaws that have been accumulating for decades. They are addressable....just not quickly, easily or cheaply. So ?

The bottomline of the bottomlines is that the central challenge is the short- and long-term economic issues. And neither candidate has demonstrated any comfort, competence or command there. Despite, at least in Barry's case, having as fine a composite team of business leaders and economists at his disposal as any I've ever known to be assembled. And John-boy's on the whole ain't to bad either. But that's in a nutshell - they need to find their VOICES on the Economy and we're running out of time.

And with only a little over three months left this may indeed be as good as it gets. 

Continue reading "Voice, Leadership, Messages, Realities: Living in a Tough World" »

Posted by dblwyo at 10:08 AM | Permalink | Comments (2)

Over the weekend a friend sent me an interesting message talking about irrational voters making the wrong choices and not doing what they were told to by the academic economics community. Now as it happens there’s often a great deal of sense in what the economists have to say -  on the whole their analysis pans out. On the other hand they often are too narrow in their views, as all specialists tend to be and neglect many real world factors and dependencies. This is such an important issues it seemed like it was worthwhile to share the exchange with you. Below is the original e-mail and my reply – which with my friend’s pronounced talent for tabling simple questions with painfully complex answers require some effort to respond to. Hence…

But the reply, longish as it is, bears so much on the dilemmas we face in this election and the structural problems we need to resolve that it provides a very useful piece of background information.

“These are serious times and we have serious problems….and we need serious people to address them. Your 15 minutes are up.”

- Andrew Shephard

Continue reading "Rational Voters, Public Choice, Economics and Futures" »

Posted by dblwyo at 09:25 PM | Permalink | Comments (2)

Our last post (Party on Grasshopper: Digging Deeper....into the Policy Agendi) laid out a perspective on a comprehensive strategic policy agendii that covered Foreign, Economic and Domestic/Social Policy and related them to some over-riding principles. The goal was only partly to suggest specifics - it was also to provide a blueprint and checklist for your own thinking and to show how all the moving pieces fit together. We took our own best shot at the "right answers" of course but are more than willing for you to take yours. That said there's many a slip 'twixt cup and lip - or as a famous German statesman once pointed out if you can't stand the sight of blood but want to enjoy the results don't go inside the sausage factory. In other words no matter what our best intentions on Policy nothing will change unless we understand how things get translated. The key factors that control the results are Policy, Players, Position and Power. After the break we're going to take a deeper dive, again, and get a little abstract on you, again, but sometimes a picture or headline is worth a thousand graphics and arm-waving so let's shoot for a little motivation. Since the last major post several friends and I have had a running exchange on "CHANGE" and one of them put it very nicely - "Perhaps only an independently wealthy President can achieve his policy goals", talking about why a decent national energy policy has been available and frozen in limbo since '01. Of the major policy issues we outline there are none them not resolvable, IOHO, and most with straight-forward and availble knowledge, resources and capabilities. So why ain't nuttin gettin done, Yogi ? Consider the following headlines:

Call for Change Ignored, Levees Remain Patchy Few of a presidential panel’s recommendations after the Midwest’s devastating flood in 1993 were implemented.

Did Bank of America Write the Housing Bailout Bill?  ." I don't understand why a realistic bill can't be hammered together. It should reflect the following realities:... It is not the taxpayers responsibility to bailout borrowers who are in over their heads, or lenders that made bad loans. How hard can that be?

Economic Scene: High Medicare Costs, Courtesy of Congress  Based on a pilot program, the price of walkers, delivery and setup included, will fall to about $80. Now, would you like to guess how the equipment makers feel about this?

Reading those headlines/excerpts perhaps it's clear why the opening cartoon makes so much sense or why we started with "Institutional Re-engineering" as the sine qu non, the fundamental starting point without which we'll continue to remove both our feet at the shoulder or higher, as the critical initial point of our Domestic Agendii blueprint. After the break we'll dissect the whole problem in some more detail but consider the accompanying chart, which summarizes, some major policy problems that we've cheerfully been ignoring until the current stage of near-terminal feasturation has set in. BtW - this and other charts are part of a dloadable Powerpoint slideshow you can open and save. Please feel free to do so and share it around as widely as you like - better yet, mail it to your political representatives. Politics of Change: Strategic Agenda vs Interests  

Continue reading "Inside the Sausage Factory: the 4P's of Political Reality" »

Posted by dblwyo at 01:39 PM | Permalink | Comments (0)

Like we argued in the last post we're anticipating a shift to more emphasis on policy and a tad less on pizazzaroni, depending on what we the voters ask for. At least so we hope and anticipate given the seriousness of the multiple challenges that have come home to roost. In sharing that post with several friends there was general agreement and a couple of constant themes in feedback. One was Barry supporters wouldn't cut the slack for John-boy they gave their own guy and visa versa - sobeit. May the past man win. Another and stronger one was for more depth on policy - a challenge we've actually been building up to with prior deep dives on particular issues, particularly economics. That said our primary goal here is to take another turn of the crank and break down the Principles/Strategies/Categories to the next level of detail. A third was the objection, a reasonable and accurate one, that no voter is going to dissect things this way. Quite true and rational - people spend more time on picking a car than a President because it matters more,more immediately and they control the whole decision rather than being a minuscule part. Yet wrong in another way. People, at least IOHO, judge the status of these issues by the surface symptoms they see and experience combined with the inputs from friends, neighbors and commentators they trust. And at the end of the day they'll look to the candidate they think will do best on these issues as they can best judge it - even if not using analysis worthy of the Kennedy Skul. Yet strangely enough not only do we have to live with this collective wisdom but over the course of time the people do tend to converge on a collective judgment that's relatively sophisticated, accurate and deep. Strange isn't it how socio-biology works itself out ? Anyway just as a reminder the opening graphic was our attempt to capture the key policy issues taken all together. While we laid out what we thought was a balanced strawman proposal in priority order, given how things work in reality and the challenges we face, the template is as important as the specifics. The intent was for you to use the blueprint to build your own house if you chose, with our suggestions as a starter kit. Though we're prepared to defend the specifics of course as being the only sensible strategy available to us :). That said let's capture the fundamental challenge facing us less abstractly.

'nuff said ? We thought so though the excerpts after the break start with some prior posts on why shooting ourselves in both feet around the kneecap continues to be an inherent structural problem. Back to that reality problem-facing thing again Pogo. BtW - just for the record - when you vote for a solution, or the candidate who proposes it, that's based on short-term fixes that serve your own special interests and presume that water runs uphill when legislated you get your own slot at the trough. Oink, oink, oink...

Like we said the central concern will be the Economy followed by Defense and Foreign Policy and then Domestic policy. That's based on our best judgment not of voters wants but their needs. However the way the dependencies work the sine qua non of a stable and safe nation is a secure defense coupled with a competent foreign policy. That then sets the stage for the next fundamental which is a healthy and growing economy - which is the penultimate requirement for any social policy debate to be material. If you can't afford it you can't afford it. A combat medic calls it Triage. Then we can talk about Domestic policy and perform the same sort of trade-off darwinian filtrations. Fortunately or not there are linkages and inter-dependencies.

Foreign Policy 

Despite what you may here the US hasn't just been influential it has been the architect and prime move of the post-WW2 world. The basic system design with the UN, World Bank, IMF, GATT/WTO, even the progenitors of the EU were all creations of US policy. Not to mention the Marshall Plan or the recovery and development of Germany, Japan, South Korea and Taiwan. And let's be real - it wasn't entirely disinterested nor should it have been. When a national decision maker is going to spend the national treasure and citizen's lives he has a fundamental obligation to allocate those resources in the best interests of his country. It just so happens that our best interests are served by supporting a stable, peaceful, law-aligning and progressive international regime. Nonetheless the world is changing and we need to change with it and help instigate the necessary adaptive evolution of a modified world system. We've talked before about why that's important in a series on the State-of-the-World and the nature of good governance (Peace, Stability and Prosperity: the Nature of Good Government) so we'll leave it there for your reference.

Economic Policy

Something we probably need to re-visit but have spent considerable time and investigation on on several prior posts - a few of which are referenced below. The fundamental requirement is Innovation - which is the major driver of new jobs, economic growth and national wealth. In the short-term we're facing a major economic downturn triggered by breakdowns and malfeasant behavior in the real estate and financial markets as well as just plain old-fashioned greed, stupidities and illegal behavior. There are no clean hands. So in the next two years we've got to fix the breakage, keep the economy from tanking as much as possible and start laying the groundwork for the future. Among other things the boulder that kills many birds would be a twofer - serious national investment and spending on revamping our infrastructure and on a concerted national energy program. Both of which by their very nature would help stimulate the economy and without which the tanking could get really rough. But both of which create longer-term jobs AND, the most important, change the structural nature of the economy. The infrastructure by making our operations more efficient and creating new capabilities. The energy program by improving national security, lowering the cost of energy and oil and creating new technologies which create new industries, jobs and competitive goods for world trade. Voila'....a win...win...win..win strategy. Which also depends by the way on both Education and Healthcare cost reductions, performance improvements and increased Benefits:Costs performance in the long-run.

Domestic Policy

The "Pigs-at-Trough" problem means that for the rest of these strategies to be successful we can't just keep substituting good intentions for understanding how to run the buzz saw and the lumber plant. Hence the need for "institutional re-engineering", i.e. we're actually pretty close on policy agendii but making them workout is a whole other problem. Now we're faced with a situation where Healthcare, Social Security and Medicaire costs will destroy the long-term economic capacity of the US. Nonetheless the later two are relatively easy fixes with a combination of bi-partisanship (ha, no I'm not kidding) and realism on the part of the voting public. When SocSecur was established retirement was 65 and life expectancy was 65+. You do the math. Ditto for the Medixxx programs. Healthcare needs some major structural changes but we're starting to get a handle on that. In terms of timing, feasibility and so on it problem goes #1 in the que because we can start making progress. But the #1 domestic policy agenda item is Education because without progress in teaching and training people for this brave new world it all falls apart. 

Part of the excerpts below are some pointers to various online programs, mostly from Charlie Rose, which start with an '04 appearance by Tim Russert which was supposed to focus on his book but ended up mostly discussing politics and policy. Notice that by and large if you didn't know the date nothing's changed. Now you can't discuss Russert without leading yourself to Danial Patrick Moynihan - one of the great public servants of recent American history and a brilliant and pragmatically insightful man. So there are two more shows of which he was a part that go back into the '90s. Guess what - the problems they're discussing are largely the ones we've just discussed.

UP to us this time....Oink, Oink, Oink. 

Continue reading "Party on Grasshopper: Digging Deeper....into the Policy Agendi" »

Posted by dblwyo at 02:28 PM | Permalink | Comments (1)

Well thru the last post we built up an interesting series of posts on the role of good government in the overall well-being and longevity of society. Which leads, eventually, to a set of imperatives for US Foreign Policy. But the lessons and implications come much closer to home. They are in fact the central but very hidden issue in these elections. And somethine we've posted on in terms of describing the symptoms, growing public dissatisfaction and consequences in several prior posts. We'll list those after the break for a refresher. But week before last David Brooks of the NYT had a magnificent column on what we think is the central issue. Here's a brief excerpt with the whole below the break:

Talking Versus Doing Barack Obama’s vote for a recent farm bill may help him win Iowa, but it will lead to higher global food prices and more hunger in Africa. In 1965, Mancur Olson wrote a classic book called “The Logic of Collective Action,” which pointed out that large, amorphous groups are often less powerful politically than small, organized ones. He followed it up with “The Rise and Decline of Nations.” In that book, Olson observed that as the number of small, organized factions in a society grows, the political culture becomes more divisive, the economy becomes more rigid and the nation loses vitality. If you look around America today, you see the Olson logic playing out. Interest groups turn every judicial fight into an ideological war. They lobby for more spending on the elderly, even though the country is trillions of dollars short of being able to live up to its promises. They’ve turned environmental concern into subsidies for corn growers and energy concerns into subsidies for oil companies.

If you'd like to see real change our central challenge is to find new mechanisms of government that recognize the interests of narrow groups but don't allow them to dominate policy making at the expense of society as a whole. There is no single policy domain we've discussed that doesn't need a new institutional framework. In other words the mechanisms of government are as important as the policy goals. If for no other reasons than we now have decades of experience with watching good intentions being suberted by terrible implementation and the triumph of special interests. 

 Consider the inter-linked social policies in the graphic. If we continue business as usual we'll get results as usual. What's the old saying....the one about the triump of optimism over experience ? Yet when and where have you heard this as a major subject of discussion in the election campgain so far ? That's why we were and are so tickled to have a major, respected and insightful columnist like Brooks put it on the table. We've talked before about the economic crisis facing us as well as the performance problems in education and other social policy areas that we face. If we'd like to see them addressed we need new mechanisms.

After the break you'll find a longer excerpt from Brooks as well as a lengthier excerpt from a young think-tanker who wrote an interesting article that triggerred Brooks' interest. That's followed by a set of other excerpts that talk about many of the symptoms in various areas. But, we repeat, if you'd like to see constructive change give some thought to the HOW...as well as the WHAT. 

Continue reading "Hidden Issues and Government Reform: the Politics of Special Interests" »

Posted by dblwyo at 04:52 PM | Permalink | Comments (0)

Just in case you haven't noticed we've ended up with a series of postings and excerpt collections that paint a picture of the current state of the world. And that SoW started with a survey of the "non-flat" realities and pointed back at the role of culture, values and institutions. And proceeded by looking at the Good, the MabyeSo's, the Bad and the Really Ugly. Overall, on balance, we have to judge that more progress has been made for more people than at any time in human history. Largely by improvements in state governance that have allowed greater stability and peace to promote economic progress. Which in turn has led to increasing prosperities around the world. Yet at the same time we've also documented a wide range of the usual troubles and tribulations as well as deeper structural challenges. It is possible that as we try and keep the wheels on all this that we're going to pass into a multi-decade tunnel on the other side of which lies a general worldwide stable order that provides the good things in life for an increasing portion of the world's populations. May it be so. At the heart of all this though we've found a couple of key things. One is the question of good government (we won't repeat Adam Smith's famous dictum which we've used several times but...please remember it). The other is the tendency of the developed countries to combine the notion of imposing their own solutions on the rest of the world without due grasp of their histories and cultures. Whether we make it thru the tunnel is, therefore, a question of encouraging the growth of good governance in a re-architected world system that builds on the native inheritances. Adopting and adapting from worldwide best practices but changing and transforming them to suite local idiosyncrasies.

So what is good government ? That seems to be the question at the heart of the challenge. 

Well we've certainly tried and experimented with a lot of alternatives thruout history, as this spectrum suggests. As a spectrum it also implies a sense of progress but that's not true for a couple of reasons. The obvious being that it is all too often the case that one sees regression historically. The other, subtler one, being that it's not clear that farther to the right is inherently better on many grounds. If one tries to impose a form of government, say a complicated oligarchy, on a small tribe that's so obviously ridiculous that we'd never consider it. But the principle holds - the form of government needs to be appropriate for the size and complexity of the society involved. It also needs to recognize the realities of history and culture - imposing a pure democracy on a people without much experience, commitment or civitas hasn't worked well either. We forget that we've been experimenting with the gradual evolution of representation and civitas - the commitment of the citizen to a society and a society committed to the rule of law reciprocally - in the English-speaking worlds for almost a 1,000 years.

The third, and most important and critical factor, is that governments should be the ultimate arbiter of force and its' monopolist in a given area. Again we've gotten used to "good government" and forgotten the historical underpinnings, or ignored them, in all our debates. We've got a lot more to explore here but this point is so important I'm tempted to stop for a moment of reverent contemplation. For example Spain, France and Germany have all gone thru major changes of government, aside from general war, in the 20thC. In France the 4th Republic, formed in '48, fell in '58 under the threat of civil war from the French military and was replaced by De Gaulle and the Fifth Republic with an entirely new constitution. That was just fifty years ago !

I've often thought that actors and English professors shouldn't be allowed to pontificate on Shakespeare because they haven't the background to  understand him. The people who should be watching, commenting and learning are large-scale organizational executives. If Iago's double-dealing, back-stabbing and clever treachery isn't as apt a description of Wall St. investment banks as there is I've seen none better. But Lear - now there they miss the boat. This isn't just about a dysfunctional family. This is about a King who's spent his entire life building a country through war, conflict and wise ruling thinking he's found a way to pass on that inheritance for his people and watching as all he's worked for and all his hopes for that country crash around him thru the ambition of the people he trusted most in the world.

And Shakespeare wasn't writing fiction - he was writing from history and his own personal experiences. As they say, "Politics read in tooth and claw". "Ol Wille Boy knew that better than the generations of professors, pundits and limp-wrists who's prisoner he's become. The same could be said for Kipling who knew what it was to face the choice on the plains of Afghanistan of blowing out your brains or waiting for the women to come out.

William especially understood that most difficult of moments for any form of government - the transition to it's successor. A peaceful transition with a history of peaceful transitions changes the entire equation because it means that stable government is likely to persist over generations. What were the Wars of the Roses, which gave rise to the Tudors eventually but tore England apart in bloody fighting over power for two generations or more, about but transitions. Go watch Ian McKellen's Richard III for as stunning a depiction as you'll ever see.

So laugh at chads all you want and believe whatever popular mythology about mis-counts you care to. But we took it for granted that the issue would be resolved according to rule, procedure and process; AND that everybody would ADHERE to it. Not someting the rest of the world can take for granted. Ask Nikita Krusshchev or Lavrenti Beria if you don't believe me. So when the Chinese are looking forward to their fourth peaceful transition in a row, according to rules, appreciate what you're seeing.

Continue reading "Peace, Stability and Prosperity: the Nature of Good Government" »

Posted by dblwyo at 11:13 AM | Permalink | Comments (0)

We've talked before about the tremendous changes going on all around is, which significantly impact all of the political and policy challenges we face (discussed in the last two posts). But we'd like to take a step back and talk about the "brave new world" that's emerging here. After the break you'll find a collection of readings which speak to this macro concerns from the accelerating pressures and breakdowns facing Europe's middle class, on which sustainable long-term prosperity and socio-politico development depend, to growing strains in the world system as more countries reach beyond initial takeoff. That middle class breakdown is a symptom of these deeper and larger changes as are exponentially rising energy and commodity costs and the metastasis of the food crisis. Fareed Zakaria's recent appearance on Charlie Rose is worth an evening's entertainment. He's always thoughtful though we don't endorse all of his arguments and conclusions. But in his argument that we're facing a new and growingly multi-polar world we wholeheartedly agree and second. What we find enormously ironic is that this new world has been visible for almost a decade now. In other words Zakaria's position is something he should have come to a long time ago...but then he had a few distractions. What that does tell us, given that he's an "inside-baseball" player is the level of grasp on the things going on around us.

Just to wrap some context around this discussion let's take a look at the long-term performance of Europe over the last two millenia (again basing our charts on the work of Angus Maddisson). Take a look at the chart on the right which shows the average % change in GDP, Population and GDP per capita for as long as Prof. Maddisson's data will allow us to take a look and let's decipher it a bit. One would think that such dry statistics are....well, dry. But in fact when you stop to think about it the entire history of the Continent is represented from a certain perspective. The stories, the lives, the achievements and the disasters. And it all shows up in the numbers. Stop and think for a minute what the per capita numbers might be telling us - in how many centuries could how many people afford even a basic minimal caloric requirement ? In Fogelman's work(The Fourth Great Awakening and the Future of Egalitarianism) on l.t. bionomic indicators he found that ~ 1/3 of the European population wasn't eating well enough to work more than a few hours/day. And that it wasn't until the post WW2 revival that food intake was sufficient to create a healthy lifestyle for the majority of the population.

You can see the various periods in European history laid out rather cleanly. History may not be entirely what you thought it was but you can see the 700 years of a Malthusian economy from 1000-1700 where famine was a constant threat. Yet you can also see the period of the High Middle Ages when GDP rose relatively rapidly, partly thru population growth but also thru the invention of major new technologies from the horse collar to windmills. Dark indeed ! Then you see the beginnings of the Smithian revolution in 1700 when GDP and per capita growth exploded though population growth flattened out as the requirement to have lots of babies was replaced by the advantages of investing more in children who might survive. And then of course there was the Industrial Revolution which changed the game for Europe, and everybody else now. But what did Europe do with their new found wealth ? They committed suicide. Look at the abrupt drops in all indicators beginning around 1913. Talk about paying the piper ! You can see the post WW2 recovery (think Marshall Plan please) where GDP and per capita income recovered. Yet population growth slowed and has now gone negative. In the long-run it's the sum of productivity and population growth that increases wealth and well-being. Europe appears to have replaced a rapid suicide with a slow-motion democide. That along explains all the "guest workers" brought into France, Germany and elsewhere in the '80s. And the foundations for the current minority troubles all the European countries have experienced.

So you see numbers can tell a story as dramatic as any written by the great Greek playwrights...if you know how to read the text. Now as you read the following excerpts consider what other stories are being told about the rest of the world duplicating the early history of Europe's rise. The question is...can they and we find an alternative to adjusting to the pressures than the ones the Europeans founds ? 

Continue reading "Brave New World: Non-Flatness, History and Challenges" »

Posted by dblwyo at 11:11 AM | Permalink | Comments (0)

We're going to start with a confession of being tremdously jealous of the Brits and what their political system has managed for them. If you've ever seen The Hitchhiker's Guide to the Galaxy you've got a perfect picture in the Borgons what their system was like after decades of socialism and wrong-headed policies - a level of dysfunction we thankfully never reached. So when Thatcher came on board and proceeded to Roto-rooter the arteries and blow out the accumulated scelrosis we applauded. And hoped that Reagan would do the same for us. Which he did but not to the same radical extent. The question then was what was the next step ? Once you got the blood flowing again it was time to pendulum back off the extemes which Major proceeded to do. And when Bill Clinton came in '92 he and the DLC proceeded to promise to maintain a healthy, growing adaptive economy, continue to free us up from regulation and find new, innovative ways to achieve major social policy reform. After being in power too long the Tories lost to Labor in Britain and Blair started his reign as the longest serving Prime Minister since Pitt. Yet, oddly, he continued Major's major policy thrusts at the expense of alienating the die-hard ideologues in his own party. Clinton turned Healthcare over to Hillary who proceeded back to 1963 with a huge, unwieldy, unworkable, high-tax and political un-saleable proposal for a giant "moonshot" of a program. At which point we got the "Contract with America" which turned out to be as ideological and unworkable in the other direction. So the Brits got 25+ years of continuous, thoughtful and workable adaptation and we got increasingly partisan, bitter and special interest based politics. Which we apparantly wanted because we kept voting for these idiots. Before you start thinking we're entirely nuts about all this we've got a few things for you to check out. First off the graphic at right will take you to a worldwide survey and you can find out where you stand. Now it's a European survey and while you're there take the time to look at the examination of European politics if you don't think the US is both different and more conservative on the whole.

Since '95 as the partisanship has grown Americans have gotten increasingly dissastisfied with Washington, the in-fighting and the breakdown. Which, IOHO, is central to this election. Before we go on though we think you ought to know there's a 3rd Way forward, it works and it's got some darn good leadership with names like Bloomberg, Schwarzeneggar, et.al. Take a pause (it's a full hour but it's chock full of really good insights) take a look at this:

A conversation with Mayor Michael Bloomberg, Mayor of New York City
and Governor Arnold Schwarzenegger, Governor of California.

[PAUSE] 

 Now we've been here before and with worse challenges. When Industrialization took off in the late 1800's we had no mechanisms for dealing with the growth of the economy, industry, urbanization, public health, education or any of the other things that we're threatening to break down our society. That was the Progressive Era and we had two great almost back-to-back presidents in Roosevelt and Wilson who helped lead us thru the morass. But they didn't get it started or down by themselves. It was started, tested and developed on the state and local levels by concerned citizens who knew we had to find ways to change. And didn't have a clue to start with but invented them and then put them in place. In fact this country is run today on the socio-political innovations of that era. Which have obviously been successful but need to be significantly, if not radically adapted, in combination with the adoption of new innovations, to deal with the challenges we face. Which are not at crisis proportions yet but could be if we don't Gung Ho - "all pull together now" - these things.

By and large we've actually reached a point of national consensus on what we'd like to accomplish though with significant differences remaining. The real problem is the means not the goals. We've been our own victims for years and decades now by creating UiC galore thru choosing to believe the easy answers and opt for the quik fix. The second graphic captures that, at least conceptually. If you'd like to see some changes then vote for the candidate who a) tells you the truth, b) recognizes how hard and complex this is and c) is willing to work in the center and not on the extremes. Otherwise, par for the course, we'll get what we deserve. Again.

And if you don't believe us check out the readings below which range from the previously unknown and hidden story of how Next the Grinch and Slick Willie almost worked it out but got sideswiped by Monica and the partisan warfare that resulted. There are so many ironies here since it was Newt who created this attack-dog political process in the first place and which has hamstrung us ever since. IOHO the reason Barry's had so much appeal this time is that's been speaking toward this Radical Center. Let's hope we can all find it.

And oh yeah, in case you were wondering the first graphic are my results :) ! 

UPDATE: This is a great interview with Howard Fineman, a noted political commentator, on Charlie Rose. It starts with a discussion of the Penn. primary contest but the real interesting part is his new book on the 13 American Debates discussing the key questions we've argued over since the founding of the country. Obviously I think well of this and it's alignment with my basic argument. See what you think ! 

Continue reading "Finding the RadCenter: Making Politics Work ?" »

Posted by dblwyo at 01:33 PM | Permalink | Comments (0)

A friend suggesed that this blog had so much loaded up that he couldn't see how the pieces all tied together so it seems like a good idea to show the framework that underlies all the postings. But just showing the framework leaves us with an abstraction - a powerful, useful tool for understanding how all the myriad bits and pieces fit together into a more comprensive whole. That's nice but so what ?

Well we're facing an accelerating seris of crisis, e.g. the Black Swan of the exponentiating world food crisis, which we need to address both nationally and internationally. What each of these problems have in common is this: they all inter-relate and are themselves built of component parts. If we want to address them we need, as my intellectual hero Robert Heinlein put "know how the buzz saw works". Good intentions are no substitute for being able to run the sawmill if you need lumber to build houses, provide jobs and all the other things that are bedeviling us. And TANSTAFFL - there ain't no such thing as a free lunch. Telling people what they want to hear instead of telling them how things work and pretending the easy answers are feasible is disingenous at best and dangerous. But not at worst. Worst is when all these problems metastasize into crisis and catastrophes. Fortunately we can solve most of them with a combination of realism, hard-work, skills & knowledge and discipline. In fact there's no crisis I'm aware of that's not capable of being addressed, if not readily solved. But let me appeal to Hans Rosling in the 2nd of two great TED talks he gave on how things all work together. In the accompanying video he uses his great toolkit to show us where we've been and are going, introduces some realism on how things really work and points the way to the critical factors we need to address. It'll take you 19 min. but it's such a well-spent 19min that you may want to watch it more than once. 

The table below summarizes Han's final points about which are the critical factors and how they serve as either means or ends. As you'll see an important and vital distinction. After the break we lay out some more of our framework - one we hope you find answers the challenge.

Continue reading "Putting the Pieces Together: Framing, Crisis & Linkages" »

Posted by dblwyo at 10:51 AM | Permalink | Comments (0)

Take a look at the cartoon (click to enlarge) on the Bear-Sterns rescue and tell me/us/yourself how you react to. Right on brother ? Yeah, yeah, sure, sure ? Well there are some elements of truth in the argument but more that are missed, wrong-headed and fundamentally dangerous. And by dangerous we're talking about the collapse of civilization dangerous - with not too much hyperbole. First off the bank's not getting bailed out the Fed is guaranteeing debts that suddenly turned into nearly worthless to keep BSC from declaring bankruptcy. And the real central truth is that Bear was involved in so many other links to other banks and financial institutions that if they had much of their paper would have followed, we'd have had a cascading run on the financial system and we'd have re-created the factors that led to the Great Depression. We'll diagnose that and related economic problems some other time. Though if you want some wonky disucssions you can try these (Five "Funny" Things on the Way to the Market,Continuing the Dialog: Facing Realities in the Credit Market).

What we'd like to focus on is the unintended consequences of well-meaning policy choices that turn out to cause longer-term and deeper problems than they purported to solve and didn't solve the problems they were targeted at. Instead they created new ones. In fact much of the last forty years of domestic policy has turned out to be social engineering on a grand scale and almost all of the consequences have turned out badly. We're going to explore that some more here with some examples and start with an illustration from wildlife management in Yellowstone Park where the restoration of the wolf population has re-created a natural and healthy balance.

Continue reading "Unintended Consequences: Blowing Off Our Own Feet" »

Posted by dblwyo at 09:13 AM | Permalink | Comments (0)

In these weekly reader linkfests we try to provide excerpted summaries of interesting and valuable stories that cover the range of topics impacting our world: Int'l Affairs, Politics & Economics, Science, Culture & Values with the coverage varying by the ebb and flow of news and interests. This time there's been enough that we're going to split them up into three parts with the first one being on Int'l Affairs. Yet at the same time we'll ask you to remember that they're part of a bigger whole and are woven together. Or can be interwoven with a little word and thought magic by looking at the shared themes, linkages and constructs.

Here let's focus on what's going on in the world. We've talked before about a couple of things. First is all the rapid fire changes and second is the fact that in the last 2-3 decades more things have gotten better for more people than at any time in human history. Think about that for a minute - you are literally living thru an evolutionarily important moment. Take a look at the multi-part chart. The top chart shows GDP per person since 1980. It may help to know that a roughly equivalent chart since 1500 a.d. is pretty flat at best. In fact as best we can guess it's flat for the last 10,000 years. Literally.

The bottom chart shows the same data for different regions of the world. You'll notice some significant and profound differences. The question is why. Let's point to a recent paper by Andrei Shliefer:

The Age of Milton Friedman. The last quarter century has witnessed remarkable progress of mankind. The world’s per capita inflation-adjusted income rose from $5400 in 1980 to $8500 in 2005. Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast. Compared to 1980, many more countries in the world are democratic today. The last quarter century also saw wide acceptance of free market policies in both rich and poor countries: from private ownership, to free trade, to responsible budgets, to lower taxes. Three important events mark the beginning of this period. In 1979, Deng Xiao Ping started market reforms in China, which over the quarter century lifted hundreds of millions of people out of poverty. In the same year, Margaret Thatcher was elected Prime Minister in Britain, and initiated her radical reforms and a long period of growth. A year later, Ronald Reagan was elected President of the United States, and also embraced free market policies. All three of these leaders professed inspiration from the work of Milton Friedman. It is natural, then, to refer to the last quarter century as the Age of Milton Friedman. The association between free market policies and social progress notwithstanding, economists remain divided in their assessments of this Age. Two recent books illustrate the divisions.

Click on the link and you can read the whole thing, which is very non-technical, explains that graph and several others and discusses some of the issues and debates (it's also dloadable if you like). We'll give you one more from a major Indian entrapaneur talking sustaining and extending India and the developing country's success to date (btw in the chart above a) India is South Asia roughly and b) it picked up after market reforms in the '90s):

A Challenge for India N.R. Narayana Murthy, chief mentor and cofounder of Infosys Technologies, sees a bright future for developing countries — if they can use their success to address the problems of poverty. Infosys Technologies, one of India’s oldest and biggest software companies, is a dominant player in the outsourcing industry. And its cofounder N.R. Narayana Murthy has helped drive India’s emergence as a global economic powerhouse. He recognizes the enormous growth that lies ahead for India, China, and other developing nations as they take greater part in the global economy, but also sees challenges. For Murthy, who has long eschewed the trappings of wealth in favor of a more modest life, India’s success — and, implicitly, the continued growth of other developing nations — will not be guaranteed until its benefits reach the country's rich and poor alike.

 So we'd ask you to read the following excerpts with all that in mind: what is progress, how does it come about and what kind of political framework is required ? Most of these stories are about folks struggling with one or another or all of those questions. There all interesting (otherwise why post) and probably deserve their own post but they make an interesting set. But we'd like to point to three in particular because they highlight some key issues.

1. China has concentrated it's development efforts on the coasts, just as earlier they started with Agricultural reform to lay a foundation for manufacturing. Now the coast is experiencing rising labor coasts, congestion and pollution while the central provinces have lagged and there's rising social dissent at the income disparities. It's always been the plan to eventually shift to Central China but that's now becoming a major new direction. Remember China has to create something like 60 million new jobs/year just to break even. They can't afford for growth to slow without social collapse, and therefore neither can we.

2. Everybody is worried about the resurgence of aggressive Russia foreign policy but in fact the underlying reality is that their military forces are incapable of projecting power and on a relative scale are not very meaningful. What this is really all about is a bit of posturing for the domestic audience to continue to restore a little pride and faith - a pride which was sadly damaged by the West's not-so-benign paternalism. A little forebearance and civilized charity a decade ago on our and the Europeans part would have done a great deal to have kept a calm bear. As yea sow so shall yea reap.

3. Germany is beginning to undertake the most serious re-consideration of it's socio-economic structure, quietly, without fanfare and without quite meaning to, since the formation of the modern state in the late 19th C. Germany the modern nation was formed by the shape and nature of German corporatism which is often given credit for the post-WW2 "Wirtschaftswunder", or economic miracle. Perhaps but it also leads, and has led, to a lot of cronyism, corruption, malfeasance, lack of adaptation and innovation and general non-responsiveness. All of the things we were lecturing the SE Asian countries about a while back, eh ? :). What most people don't realize is how central the institution and forms of big business are to the central structure of our societies. Nor how the different ones evovled by different choices on industry, structure and governance. The reference work cited along with the article on German changes will take you toward the best discussion ever written, IOHO, to explaining how that's worked around the world over the last 100 years. If you'd like to know what some of the deep currents and structures have been...well...try that...

Continue reading "WRFest 23Feb08(Int'l Affairs): What Makes for Progress" »

Posted by dblwyo at 01:48 AM | Permalink | Comments (0)

The prior post, while our regular weekly collection of interesting stories and links, had a couple of central themes. One of which is what kind of world do you want to live in ? A question that's with us every day in how we live our lives but is also central to this year's elections. On both a personal, micro level and on a community, national and macro level. In fact it is, at least subliminally, THE central question of the election though not yet at center stage among the punditry. It IS however center stage with voters, especially for the younger folks.

I recently ran across an interesting set of comments on these topics by, of all people, Warren Buffett. The Investment guru of the century and the folksy sage of Omaha. Now as it happens he was supposed to be speaking about security analysis and investments. But he began his time with a focus on the values that make for a happy life. And ended it with comments on the nature of the world and what kind of world we'd like it to be. 

Now I'd recommend watching all ten parts of this vidclip series but the picture at right will take you to Part 1 on individual values, which is as good an argument for living a life of integrity, finding good work that you love and being satisfied with a reasonable lifestyle as any I've ever heard. And a pragmatic and workable one as well. Zen-like in fact when you parse it out.

Part 10 which talks about the nature of the world is, in my view even more interesting. It riffs on Warren's idea of the Ovarian Lottery. That if you're in his audience you've already WON because you're an American, a college student and have the drive, ambition and intelligence to leverage your opportunities.

He's not, emphatically NOT, picking on anybody in particular but putting some real ground truths out there (and bear in mind this speech was circa 1998). Here's a paraphrase on his model Supposed God dropped by and asked your help in re-designing the world ? Here's the catch - once you put  your specifications out there then your name goes back in the lottery bowl and gets re-drawn. Suppose God reaches in and pulls out 100 marbles and your name is on one. In '98 the chances were about 1 in 20 at best that you'd even be an American. Of that one maybe 1 in 3 or 1 in 4 would be a college student. Which is no guarantee of anything. Nontheless with a reasonable level of effort such a person is going to live a life that's healthy, fairly well rewarded, eat good food, drink good wine, see interesting places and have a fair shot at doing rewarding work to make their way. What about the other 19 ? Their chances ain't so good.

Well that makes things pretty darn clear to me - I'd like a world where a larger portion had a better chance. Where that portion grew fairly rapidly and their share of things got better and better.

The thing is that's not just me or idiosynchratic - it's been the goal of most people now and thruout history. But now, more than at any other time in history more people have a shot. And more and more will have a shot if we can keep the wheels on the wagon as it roars down the hill.

Let me put it another way. In fact try these three:

1. Would you rather have a larger slice of a smaller pie or a smaller slice of a much bigger pie ?
2. Odd paradox - I'm better off when we're all better off. And y'all are better off, all things being equal, when I'm better off. Making it really intellectually painful btw that's a fundamental tenet of economics. And the basis for the socio-biology of our evolutionary history as a social species.
3. If we don't build a world where everybody has a better shot at a bigger slice there's always a pretty chance we can end up spending all our time squabbling over who gets which slice of a smaller pie. And in the process dropping the whole thing on the floor and making a mess.

Posted by dblwyo at 08:56 PM | Permalink | Comments (0)

An interesting question, is it not ? At the end of the day a lot of the sturm und drang in the elections, or elsewhere, are really disputes about just that question. If it wasn't clear then let me admit our attempt at sketching such a world was captured in a series of holiday posts, capstoned by Welcome to Ganesha's World: Obstacles, Foresight and Action, which also lists the prior links and has some interesting readings in its' own right. Several times this last week we've seen some other posts and stories that ask this essential question. But to put it more directly our ideal world is one in which everyone has a reasonable opportunity to live a decent life, develop their own attributes to their best potential and strife is reduced to the workable minimum. We've argued, perhaps a little too implicitly, that such a world is possible and achievable but requires a stable order, a system of justice that people believe is fair, defense against both external and internal enemies and a sound, progressive economic system. There's lots more to say and explore but let's at least take that as a strawman to work with.

In this week's readings you'll find several that point at the topic and, in fact, point at the results. Below you'll find a nice little summary from the Economist that illustrates how more people have made more progress in the last 2+ decades at better lives than at any time in human history. Progress that is in fact the result of the gradual emergence of the key characteristics we listed above across wider and wider stretches of the world. This contrast to another article that finds US "Hegemony" is fading. Well Bravo - not because I'm anti-US. Far from it. In fact I'd argue that the US had made larger efforts in its' history to help the world move in the right directions than any other power in history (THE case in point being made by the Marshall Plan as related in the "Most Noble Adventure"). Rather it's time for the rest of the world to move to "that natural state of opulence" that they can achieve thru justice, good government, fair taxes and a strong defense (paraphrasing Adam Smith of all people). Let me put it another way - even if the US slice of the pie gets relatively smaller it's possible to make the whole pie so much bigger that we're all better off. Oddly enough for the Dismal Science this is a fundamental proposition to which 99% of all mainstream economists would agree. 

• UPDATE: in browsing the online archives of the Charlie Rose program ran across an interesting program that, by-n-large, captures the points about the US role in being the primary supporter of the current international system. While I don't necessarily agree with all points they largely are on target. BtW on these lines have you ever consider that it's the US Navy which defends the sea-lanes for free access for oil for all countries of the world ? Despite all the rhetoric and arm-waving China, India and Japan count on the USN to protect this vital underpinning of their economies and socieities :) ! 

Some of the other readings below talk about the US elections in which this is becoming, as it really always was, the central question. Combined with the other of character and leadership. At the heart of all these issues, in many ways, lies the question of values and choices. By both citizens and leaders. I found it extraordinarily refreshing and encouraging that most of my fellow citizens don't view questions of "Values" as code-words for social policies, unlike the punitocracies. They view them as critical attributes like honesty, integrity, courage and a willingness to do what's right. Another complement can be found in what occupations we admire the most - if you skim those two excerpts or read the backup articles hopefully you'll find it as encouraging as I do.

One of the most interesting explorations of values, believes and religion is one by ExperimentalTheology who is currently, as both a devote Christian and a professor of evolutionary psychology (think about that for a minute :) !), exploring the meaning of Peanuts as a source of theological insight on values, life and living. Highly recommended. 

At the end of the day the "What World" game is one we can all play. In fact we play it whether we want to or not. So, whether you feel like chiming in in the comments, riffing over somewhere else or just kicking it around, ask yourself the question. Then do yourself and all of us a favor and add two more. 1) How do we get there and 2) what are the mechanisms and institutions for making it work ? Hint take the next step (WRFest 20Jan08(Politics & Policy): Take the Next Step)

Continue reading "WRFest 27Jan08: What World Do You Want to Live In ?" »

Posted by dblwyo at 12:40 PM | Permalink | Comments (0)

What are Leaders without Followers ? No one can be a George Washington without being able to persuade others that the path they want to walk is the right one. In fact the best leadership is that which helps the group (the society) find and express that path and commit to it with energy. Yet at the same time helps to shape it, stimulates the emergence of the best and guides its' development.

In other words there is an interaction with the citizens of a society which shapes the future and the character of the citizenry is as important as that of the leaders. In fact they are co-dependent and co-evolutionary. There are many qualities we could consider but three stand out, in my mind: Respect, Tolerance and Civitas. We explore those qualities more below but before digging in let's look at the principles of conduct, personal and social, enunciated by another great man. Before naming him let us frame the situation by looking to William James:

The mutations of societies, then, from generation to generation, are in the main due directly or indirectly to the acts or the examples of individuals whose genius was so adapted to the receptivities of the moment, or whose accidental position of authority was so critical that they became ferments, initiators of movements, setters of precedent or fashion, centers of corruption, or destroyers of other persons, whose gifts, had they had free play, would have led society in another direction.

Societies of men are just like individuals, in that both at any given moment offer ambiguous potentialities of development. Whether a young man enters business or the ministry may depend on a decision which has to be made before a certain day. He takes the place offered in the counting-house, and is committed. Little by little, the habits, the knowledges, of the other career, which once lay so near, cease to be reckoned even among his possibilities. ... It is no otherwise with nations. They may be committed by kings and ministers to peace or war, by generals to victory or defeat, by prophets to this religion or that, by various geniuses to fame in art, science or industry. Great Men, Great Thoughts, and the Environment

 You may have guessed from the illustration that our next exemplar of a great man is Muhammad, Seal of the Prophets of Islam. Out of respect for some practioners beliefs on representation we show a calligraphic representation of his name and fundamental tenets, "There is No God But Allah and Muhammad is His Prophet". In the 7th C his insights and wisdoms made as profound an impact on the world as any leader ever has. And obviously that impact continues to today !

Despite the headlines and events of the last several years when you dig into the Five Pillars of Islam and its social teachings they present a code of conduct, of citizenship, that one can't help but admire. In fact in reading about them the transformation of my own views was personally startling. They are tenets we would wish all citizens of all societies would adopt and adapt. 

Continue reading "Practicing the Spirit: Respect, Tolerance and Civitas" »

Posted by dblwyo at 08:29 AM | Permalink | Comments (0)

Let's keep on with the notion of the broad aspects of Christmas Spirit - previously we asked what is it and what are its' consequences, either by presence or absence. Sometimes, in fact often if not always, we forget what we owe to those who went before us and what contributions they have made to our current peace and prosperities. In some circles this is called Leadership and it calls for Leaders who put the welfare of the public ahead of their own immediate gain. More importantly, it calls for Leaders who have a vision of Moral Leadership and fundamental bedrock values that they will adhere to in pursuit of the general welfare under the most trying of circumstances. The WSJ recently published a historical story about Gen. Washington's resignation of his commission that provides perhaps the best illustration of this I've ever heard of.

Washington's Gift Our revolution could have ended in despotism, like so many others. There is a Christmas story at the birth of this country that very few Americans know. It involves a single act by George Washington -- his refusal to take absolute power -- that affirms our own deepest beliefs about self-government, and still has profound meaning in today's world. To appreciate its significance, however, we must revisit a dark period at the end of America's eight-year struggle for independence. … the previous eight months had been a time of terrible turmoil and anguish for Gen. Washington, outwardly always so composed. His army had been discharged and sent home, unpaid, by a bankrupt Congress -- without a victory parade or even a statement of thanks for their years of sacrifices and sufferings. Even America's best friend in Europe, the Marquis de Lafayette, wondered aloud if the United States was about to collapse. A deeply discouraged Washington admitted he saw "one head turning into thirteen." Was there anyone who could rescue the situation? Many people thought only George Washington could work this miracle. For a long moment, Washington could not say another word. Tears streamed down his cheeks. The words touched a vein of religious faith in his inmost soul, born of battlefield experiences that had convinced him of the existence of a caring God who had protected him and his country again and again during the war. Without this faith he might never have been able to endure the frustrations and rage he had experienced in the previous eight months. This was -- is -- the most important moment in American history. The man who could have dispersed this feckless Congress and obtained for himself and his soldiers rewards worthy of their courage was renouncing absolute power. By this visible, incontrovertible act, Washington did more to affirm America's government of the people than a thousand declarations by legislatures and treatises by philosophers. Thomas Jefferson, author of the greatest of these declarations, witnessed this drama as a delegate from Virginia. Intuitively, he understood its historic dimension. "The moderation. . . . of a single character," he later wrote, "probably prevented this revolution from being closed, as most others have been, by a subversion of that liberty it was intended to establish."

 Do we really need to say much else after reading that excerpt ? Of course we will but take a moment and really stop and think about an act with few if any parallels in history. Consider if you will that Napoleon was a near-contemporary of Washington's, the choices he made and the consequences for history. Or George III's comments that "this made Washington the greatest man in history". Consider  that not only would Washington have been within his "rights" to seize power and protect his soldiers but many thought it would be RIGHT to protect the integrity of the country as well.

Continue reading "Following the Spirit: Leaders, Leadership and the "Wise" Course" »

Posted by dblwyo at 09:51 AM | Permalink | Comments (0)

Another week with a lot going on – on the surface and in the depths. A turbulent week perhaps, for a turbulent environment ? J  As it happens, if you haven’t noticed, Alan Greenspan published his memoirs and it’s been covered in the general and business news extensively, if not always positively. To the point where his interviews, TV show appearances, etc. swamped the biggest and most surprising Fed rate cut in four years – which tells you where they really think the economy is going.

Now at this point you are more ‘n likely asking yourself so what – why do I care ? Aside from Uncle Alan’s being one of the longest serving and most successful central bankers in world history of course. Well on several fronts. But the question you’re really asking is why do I care about economics and the economy ? After all it just is.

Several years ago I shared a summer rental with several Audiology majors who, as they put it, didn’t care where the check came from as long as it came. Let’s all pause and take a deep breath for a minute for the enormity of that story – which is true btw.

Over the years it’s been my “pleasure” to have that conversation repeatedly with many folks – including a recent exchange with a long-time colleague with a good education, years of experience and great skill in business and technology analysis. While some progress has been made the emphasis here is on some.

Continue reading "Weekly Reader 23Sep07: Political Economy & Int'l Affairs" »

Posted by dblwyo at 02:02 PM | Permalink | Comments (1)