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Saturday, February 26, 2011

Off Target: Corporate Spending as "Speech" against Gay Rights

In a 5-4 decision on January 21, 2010, the US Supreme Court ruled in Citizens United that federal restrictions on corporate spending in elections constituted a violation of free speech. Critics called it wrong to equate corporate “speech” with individual speech and said the ruling would allow special-interest money to flood election campaigns. The bipartisan nature of the opposition to this ruling is striking in these largely partisan times. The court’s ruling is opposed, respectively, by 76, 81 and 85 percent of Republicans, independents and Democrats; and by 73, 85 and 86 percent of conservatives, moderates and liberals. Majorities in all these groups, ranging from 58 to 73 percent, not only oppose the ruling but feel strongly about it. Even among people who agree at least somewhat with the Tea Party movement, which advocates less government regulation, 73 percent oppose the high court’s rejection of this particular law. In addition to overwhelming opposition to the decision, there’s also bipartisan support for Congress to try to reinstate restrictions on campaign spending by corporations and unions.

So when Target sent a check for $150,000 to MN Forward, a Minnesota-based political group backing a gubernatorial candidate with penchant for opposing gay rights, people wondered what business Target has in taking sides on that issue, even if the group was also pro-business. MN Forward endorsed and was paying for ads for the Republican gubernatorial candidate Tom Emmer. On Emmer’s website he defines marriage as a “union between one man and one woman” and he has come under fire for his $250 contribution to a Christian rockband that has been known to speak harshly of gays. Emmer told the Minnesota Star Tribune that the controversial rock band “You Can Run But You Cannot Hide,” were “nice people,” following band member Bradlee Dean’s reported comments that Muslim countries that support execution of gays are “more moral than even the American Christians.” To be sure, the managers of Target were not spending their companies’ “free speech” in defense of such a view, but that the wealth qua free speech was nonetheless being spent on a candidate who had made such a comment makes the Target CEO an unwitting accomplice.
Rather than viewing Target managers distancing themselves from Emmer’s view of gays as corporate social responsibility, I contend that the problem lies in taking spending as speech. Put another way, Target would have better stores if it sticked to its knitting, as it were.

Diverting money even to political campaign groups that further a pro-business agenda is off from the business’s main business, which in the case of Target is to sell retail. Besides the collateral damage from unwittingly helping campaigns on issues that are not even pro-business, diverting cash reserves to political campaigns puts corporations in the business of electoral politics, which is another sort of retail. In the case of Target, it is not as though the stores could not be improved from a business standpoint.  Once I accompanied a foreign friend of mine to a Target to return the coat he had given his wife for Christmas. Because he had paid by check, he had only the option, according to the “customer service” employee, of exchanging it. He could not get his money back—though he could have had he paid cash or by credit card. The “reasoning” of Target’s managers was that a check is “like kind” to an exchange voucher.  My friend and I left the store committed not to return, and I have not. Even in terms of influencing electoral politics in a pro-business general direction, Target’s management has plenty else to do closer to home—if indeed it is a home.  Rather than being socially responsible, a company ought to focus on its knitting.  That—doing business well—is the responsible thing to do because it is what a business’s owners expect from the managers of their property. Rather than being able to influence electoral politics beyond their expertise, managers ought to be restrained more by stronger corporate governance. To be sure, managers have a tendency to over-reach. Treating their spending decisions as “speech” only enbles them.

Sources:
http://blogs.abcnews.com/thenumbers/2010/02/in-supreme-court-ruling-on-campaign-finance-the-public-dissents.html
http://abcnews.go.com/Business/target-best-buy-fire-campaign-contributions-minnesota-candidate/story?id=11270194

Corporate and U.S. Government Antipathy toward Federalism

In October of 2009, the U.S. House Financial Services Committee voted to give the federal government the power to block the states from regulating large national banks in some circumstances. The compromise approved by the House allows the Comptroller of the Currency to override the states, but only if that office found that the state law “significantly” interfered with federal regulatory policies.  This clears the way for a new federal agency to protect consumers from abusive or deceptive credit cards, mortgages and other loans.  Adoption of the compromise was a partial setback for the banking industry, which would have preferred to avoid having to comply with state laws that are sometimes stricter than federal rules.  Barak Obama and Barney Frank were pushing in the other direction—for subjecting banks to the relatively strict state laws with no chance of appeal to the US. Government.

This case of compromise points to the influence of large corporations on the Congress as a culprit in the on-going eclipse of federalism.  Large corporations operating in many of the American republics would rather have one regulatory infrastructure, so they push the U.S. Government to assert itself at the expense of the State governments using pre-emption.  Even where the federal government is silent in a policy domain, it can keep the State governments out. This is not to say that industry is the only force behind the march toward consolidation.  Obama and Frank were no doubt assuming that health-care and education are properly directed at the level of the U.S. Government rather than by the States.  This involves adding strings to the spending clause of the U.S. Constitution.

While it might be more convenient to have Washington as the point-person, we might miss the checks and balances permitted by a viable federal system wherein the State governments can hold back an encroaching federal government.  Moreover, we might wonder whether one legislative size fits all in a Union of republics that spans a continent.  There is a reason why the delegates in the constitutional convention designed a federal system; they weren’t just acting on a whim.

So here is my basic point: the present holders of power might have incentives to use it at the expense of the long-term viability of our system of public governance.  In other words, it might not be in the interest of our federal officials and corporation executives and boards to maintain the viability of our federal system. To the extent that their interest prevails in spite of the inherent diversity in the United States, this could be the empire’s undoing before our eyes.

Source:  Compromise Bill Could Block States on Bank Rules http://www.nytimes.com/2009/10/22/business/22comptroller.html?ref=politics

Friday, February 25, 2011

Online Privacy and Advertising Databanks: Kant, Societal Norms, and Regulation

$26 billion-a-year by 2011, the internet advertising market is lucrative to venture capitalists who want to invest into companies that help target online advertising. Between 2007 and 2010, venture firms invested $4.7 billion in 356 online-ad firms. "Its a huge market and it's growing," Chris Fralic at First Round Capital says. Fralic's company has backed 33Across, which analyzes users' social networks, and Demdex, which has a "behavioral bank" of user profiles. Ethically, user on-line privacy is at issue. I contend that user privacy can be protected from dangers of concern to users while willing users can benefit as consumers from information regarding products that they want and would not otherwise know of.

According to The Wall Street Journal's "What They Know" report, the top fifty American websites installed thousands of "cookies" and other tracking technologies on people's computers in 2010. The purpose was to create sophisicated dossiers on people's personal activities and to track them in real time. At the end of 2010, the U.S. Federal Trade Commission urged the creation of a "do-not-track" system and the Obama administration backed an online "privacy bill of rights." At the same time, the EU and its states were grappling with the same issue.  One issue there was whether a user simply turning on his or her computer and going online constituted consent to "cookies."  The relative lobbying power of the industry with the vested interest could be seen to differ between states (e.g., Britain and France).  In other words, governmental restrictions can not necessarily be counted on to protect privacy and thus obviate the ethical problem. Accordingly, I now turn to an ethical analysis, putting the question of government regulation aside.

As of 2011, Americans spend 28% of our media time online. Also, online-ad start-ups do not require a lot of money relative to start-ups in other industries. Many of the online ad start-ups attracting funding connect website operators with advertisers who want to capitalize, according to The Wall Street Journal, "on the Web's ability to target individual users." According to Nick Sturiale at Jafco Ventures, "Advertisers want to buy individuals." We are bought, in other words, by being targeted even in our social networking. In short, in going to where people are, there is a lot of money to be made by bringing ads to the people most likely to buy from them. To be sure, consumers benefit when they are made aware of products of particular benefit to them. In business terms, connecting people with products they want is like water going downstream: money is naturally to be made, so it will.  Hence even government-constructed channels or dams are apt to be subtly worked around as money-seekers inevitably seek out sources in more efficient ways. The ethics of privacy do not translate except if there is a financial backlash from actual or potential consumers spurring the ads (i.e., voting for privacy with their wallets and purses). I suspect that few users will spur online ads, however. First of all, consumers who would like to buy a new product tailored to their interests may not all object to the loss of their privacy. Enabling users to allow or disable cookies would allow consumers to make this decision. Secondly, users may not object because the fact that they have been researched and targeted is not typically transparent to them when no one uses the information against them in particular. The loss of privacy is abstract where one has no knowledge of it happening in real time and one does not feel harmed. Indeed, where such breaches are widespread, the use of the data uncovered is routinized and contained.  For example, if a given user's search of porn sites is just one among millions, the individual user can have comfort in the relative obscurity of numbers.  However, what if a potential employer gains access to such information?

The danger with respect to privacy could be if a business shares its "behavioral bank" with organizations with an interest in a particular user.  Such use would not be necessary even in the case of users who want ads tailored to their particular interests. Someone who regularly watches porn might want to know if there is a new sex toy on the market, for example. But should a potential employer such as Walmart be able to access a "behavior bank" to gain personal information on people who have applied for employment?  What if Walmart owns the company that has the bank?  Would not the information then be the property of Walmart?  Furthermore, what if an agency of the federal government were to cite national security to gain access on particular users? Privacy concerns are really oriented to such access concerning particular individuals, typically by third parties, rather than to marketers using pooled data to further segment markets. Legislation ought to be focused accordingly.

In terms of ethical theory, "buying" and "targeting" online users so as to gain and use information that they regard as private violates Kant's "Kingdom of Ends" version of his categorical imperative.  For those of you who have lives and thus do not read Kant, the principle here is that people, being rational beings (i.e,, having the capacity to use reason), should be treated not just as means, but also as ends in themselves. This principle limits exploitation or manipulation of others because using them should not violate treating them as ends in themselves. The reason Kant says for the "ends in themselves" comes down to reason itself having absolute value because we use it to assign value to things.  Just as the sun is the source of light in our solar system, reason is the source of value, according to Kant.  As the source, reason must have absolute, or undefined, value. Incidently, when I get on a topic like this--boiling Kant down and applying his principle to a real-world topic--I think of possibly teaching in spite of my multidisciplinary background (which does not jive well with cubbyholes). Anyway, the rational beings at the online advertising firms seem to be ignoring what the rational nature of online users entitles--specifically, to be treated as an end in oneself rather than merely used.  To be sure, using others is not entirely blocked, as long as it is consistent with treating others as ends in themselves.  In the present issue, users who do not want to be tracked even though that could mean they do not get an informational benefit as consumers are not treated as ends in themselves if they are tracked anyway. We might call it a "boundry issue" on the part of business managers.

In abstract terms, selfishness and greed can prompt a rational being to treat oneself as an end in itself while treating other people as objects. I suspect that this is the root complaint against business managers: that they view humans exclusively as resources while in the role of manager. The problem is that greed is like water running downstream to find wealth below, so an ethical obligation or duty to go around ends in themselves can easily be ignored. Normative constraints do not compute in the business lexicon of greed. I find that people outside of business tend to erroneously project moral principles onto the restricted technical domain of cost/benefit analysis in business. Hence moral claims are made and perceived to be ignored, and a business climate can become toxic. Hence, legislation is typically sought by the general public, even though that route cannot mandate treating others as ends in themselves. We settle, in other words, for temporary dams tantamount to an ethical injunction. In the end, for being moral beings, we humans are remarkably immune to our own nature in the pursuit of what we perceive as our own interests.  In terms of privacy and online data on users, interests particular to a given firm do not recognize "personal boundaries" even as the latter have become salient in modern society. In other words, besides business ethics, business and society comes into play, and of course business and government tends to be the domain in which force or power swoops in to mop up the mess, albeit with thumbs and externally only.


Source: Scott Thurm, "Online Trackers Rake in Funding," The Wall Street Journal, February 25, 2011, pp. B1-2.

See my related essay on the regulation of cookies in the EU: http://thewordenreport.blogspot.com/2011/02/business-and-european-integration-case.html

Thursday, February 24, 2011

Physicians and Lawyers: On the Presumption of Ignorance

It would surprise virtually every American (but only a few Europeans) to know that neither the JD nor the MD degree is a doctorate.   Each one is the first degree in its school, or discipline.  Yet we presume them to evince advanced knowledge, even allowing people with two undergraduate degrees to be "professors" (really instructors) in American law and medical schools. In the school of law, the sequence of degrees is: JD (same as the LLB), LLM (hint: M...Masters), and JSD (Doctorate in Juridical Science). The JSD degree includes advance study, a comprensive exam (an academic exam graded by faculty--not a industry-qualifying exam like the bar), and a defended dissertation. A doctoral degree must be the terminal degree of a field, contain a comprehensive exam, and include significant original research in a defended dissertation. The JD misses on all three points. The title of the first degree in law, the LLB (bachalors in letters of law) was replaced with "JD" largely for marketing purposes in 1901 in the founding of the U of Chicago law school (by three Harvard professors) because prospective students were complaining about having two "B" degrees after seven years of school.  People don't like to think they have gone to school for seven or eight years for two undergraduate degrees, but this is precisely what they have done. Nevertheless, the new law school in need of students complied with the "customer" complaint with a feat of mirrored marketing that was perhaps intentionally ambiguous.  To eviscerate the ambiguity in  Juris Doctor and a doctorate, one must look beyond the mere words.

In medicine, the MD is the first degree. Substantively, it contains survey courses and some seminars, just as in a BA or BS program in liberal arts or sciences. The D. Sci.M. is the doctorate in the field of medicine, and the M.D. is a prerequisite (so the latter cannot be the terminal degree of the field).  The fact that some schools give the D.Sci. M. degree as an honorary degree does not mean that it does not exist elsewhere as the real, terminal degree. Particular medical schools may give the degree as honorary where there are not enough prospective students interested in a doctorate in medicine. 

In divinity schools, the M.Div (before 1968, called the BD) is the undergraduate degree. It is followed by the STM (the masters) and the DD.   When the BD name was changed to the M.Div name, a perhaps-deliberate ambiguity was created wherein one apparent masters would be followed by another (M.Div. and STM).   It evinces a category mistake to have two masters degrees with one being substantively prerequisite to the second. Substantively, the M.Div. program consists of a year and a half of survey classes, followed by senior seminars (just as in the undergraduate law, liberal arts & science, and medical programs).  To regard a graduate with a M.Div., JD, or MD as having achieved advanced knowledge in the respective field is a fallacy perpetuated by the superfluous esteem we heap on the "professions" on account of their association with money (the religious vocation being revered for sacrificing the vaunted wealth).

It makes no difference how many degrees a person has in other fields before commencing study in a professional school. In beginnning to study law, medicine or theology, one begins with survey courses. Furthermore, it doesn't matter whether one's particular school or even country offers the doctorate in the field.  Try telling people that your BA is a doctorate in English because no Ph.D. in the field is offered at your college or even in one's country.  Every field (just like life itself) has a first degree and a terminal degree.  A student does not obtain advanced knowledge in two or three years in a law, medical or divinity school, but only a first degree's worth in liberal arts and sciences.

Sadly, we as a people have esteemed the physcians and lawyers so much that we have vaunted them by unwittingly appreciating their degrees into the stratisphere.   One degree in a given field does not a doctor make.   Europeans have been correct in refusing to call an American physician, "Dr. Smith."   The fact that Mr. Smith would take offense just points to the arrogance that lies in ignorance.  The rest of us enable Mr. Smith to claim the doctoral title before his last name because we don't know any better.   We give physicians titled trophies that they do not deserve.  Moreover, the use of vocational titles (including Professor Jackson) risks a vocational reductionism wherein a person is rgarded (and comes to regard himself) as that which he or she does.   Is vocation really so important that it eclipses or overcomes a person's identity?

Maybe it is time that we say "enough is enough" on the green glitter and deflate those who have vaunted their own entitlements going along with being a  professional  to a value or level more fitting to what they have earned.   The extent of illusion that a society can create and maintain is astonishing, yet being in the illusion (think here of the Matrix) we do not see it.  It is time to see the green numbers on the wall.  No wonder even the hint of such sight is apt to incur the wrath of the agents who instinctively protect the illusion because they benefit inordinately from it.   It is time, ladies and gentleman, that we wake up, as the sun is already quite high in the sky and there is much to be done.

A Society Based on Corporate Culture: A Case of Sickness behind Fakeness?

Scripted "conversations" for employees.   Some customers as "members," and the others "not."   A larger cup of coffee being an "upgrade."   It occurs to me that a blue collar worker would simply laugh in the face of a chain retail store employee using any of these misappropriations as if they were natural and fitting.  That the rest of us don't laugh and the employees are not even likely to be aware of their own fakeness, much less stop it, tells me that modern society has to some extent adopted the corporate practice, even if tacitly.  That is to say, many of us have been mindwashed into accepting fakeness as authentic in the public square.

Meanwhile, inside corporate offices, the language used can bespeak a sickness far worse than mere fakeness. Consider, for example the statement made by the head of finance at Morgan Stanley in September, 2008 when he was looking at Wachovia's bad debt: "That's a shit-sandwich even I can't get my big mouth around."  (Sorkin, Too Big to Fail, p. 450).   Add to this the myriad of military bloodsport references routinely made in stark corporate offices by suits whose actual sport is golf, and the nature of the corporate illness is clear: undealt-with aggression--unrequited anger really--in stint of malignant narcissism.  The linguistic signs and the over-reaching are palpable.

Ordinarily, I would predict that feckless fakeness projected outward from vulgarity is bound to be exposed or collapse one day. However, this is not necessarily so if enough people take the fakeness for genuine and do not know of the underlying pathology behind the store walls at headquarters.  It is perhaps like a wife who has been married to an alcoholic for decades.  Can she be expected to recognize the obvious?  Sadly, the fakeness of corporate retail consumer relations may become the de facto archetype for ordinary human interaction in modern society.  Adopting an employee's manner of fakeness--even a false smile and sales talk under some subterfuge--can give one yet another means of passive aggression. For example, one might use fake expressions and mannerisms as a way of pushing someone away.  Fake kindness can be more insulting than genuine complaint. 

What particularly concerns me is the extent to which people enable the corporate misappropriations and fake emotions in stores and customer relations centers.  Perhaps we really don't get it.  Maybe we need an upgrade in our state of awareness, and in our guts.  In the end, weakness is all too comfortable with fakeness.  If a malady is sufficiently ubiquitous, it can be easier to take it for normal and adapt to it than to challenge it.  Even in such a context, a few free spirits may still be driven by their nature to overcome the fakeness and insist on genuine communication.  Once I heard a customer say matter-of-factly to a Barnes & Noble employee, "No, I'm not a member. I'm a customer."  The employee just looked at her. The authentic communication must have strunned the employee, who had doubtless been mindwashed into believing that fakeness was real.  Where retail fakness is ubiquitous, calling employees out on it is akin to waking someone from the Matrix. Of course, health can only be viewed as sick to the sick. A person accustomed to a dark movie theatre is apt to enter a sunlite lobby in pain.

As another example of utter fakeness designed to manipulate under a subterfuge, consider the ubiquitious, "We apologize for any inconvenience."  Of course, the lack of any real regret can be easily concluded by the failure of any accompanied "money where your mouth is."  If a business, which is an economic entity, refuses to put its money with its apology in the form of willing compensation, the verbal "apology" should mean nothing. In other words, words alone are neutral or invisible where money is the lifebloood.  It is so easy--so utterly convenient--for one who loves money to simply make a verbal statement that does not involve paying out any money.  Yet we are all such suckers for being so easily mollified by the easy corporate-speak.  No one says, "this is a business, so unfortunately there must be a financial component to your apology for me to recognize your apology."   The inevitable answer would be a mere repetition of, "I apologize for any inconvenience" as though it were not a mere repetition (i.e., fakeness again) and thus sufficed.   It is in the nature of weakness--of sickness really--to disagree or refuse by ignoring (i.e,, repeating as though not doing so). The repetition simply adds injury to insult, for there is passive aggressive in it. I suppose this is really what those of us in modern commerical society are missing: the passive aggression in business (and, more specifically, as manifested in customer relations).  Business managers and employees cannot express their anger toward customers, so the emotion comes out via fakeness as "friendliness." It is no wonder the underlying dyanamic is not apparent, for it is using its opposite to express itself.  Customers ought to recognize the self-serving convenience and fakeness, yet this might make the underlying vulgarity transparent.  At least that would be authentic, and perhaps a solution found.

Executive Stature: Glimpses of the Man Behind the Curtain

One of the perks of corporate office is the presumption of stature and legitimacy.  In other words, the general public typically brings all sorts of assumptions along when reading about the behavior of a CEO.  I contend that the reality of the person behind the curtain is far different from what is portrayed.  That is to say, at least with respect to how CEO's typically want to be viewed in terms of corporate responsibility, I suspect that the reality in the executive suites is far different.  In fact, the reality can be downright childish.  Richard Fuld, who was the CEO at Lehman Brothers, may well have behaved like a six year old when upset. Had the general public been given a view of Fuld's antics, we would have shaken our heads not simply out of utter disbelief that such immaturity could be in such a position, but also in recognition of the gap between public and private persona.  Such a gap is dangerous in a republic wherein the electorate is to hold the government in check (and the government in turn is charged with protecting the public and the market system itself from being compromised from firms too big to fail). 

The full essay is at "Executive Stature."

God's Gold on Wall St.: A Vaunted Self-Assessment of God's Work

A year after the financial crisis of 2008, Lloyd Blankfein, the CEO of Goldman Sachs,  found himself vilified for his firm’s quick return to risky trading in spite of its new bank holding company status. Populist resentment at the time was especially pitted against the hefty bonuses from the trades. Also, people were upset about the benefits that the bank had obtained from the decisions of its alums in the U.S. Government—specifically, in the U.S. Department of the Treatury. For instance, Goldman Sachs and other AIG counterparties got a the dollar-for-dollar payout from AIG thanks to an infusion of funds for that specific purpose by Treasury. Regardless, in an interview with the London Times, the highest-paid CEO (at least in the financial sector) dismissed such talk and defended his money-making machine and its compensation.  In addition to being the engine of economic recovery, according to Blankfein, Goldman Sachs provides a social function in making capital available to companies so they can expand. Stunningly, he adds, “I’m doing God’s work.”[i]  Such a claim is a far cry indeed from Thomas Jefferson’s warning that banking institutions are more dangerous to our liberties than standing armies.[ii]  Perhaps God intends to undo our liberties by bailing out the banks.

Besides these rather obvious problems with Blankfein's religious claim is his presumption to know what God's work is, and, furthermore, that he is doing it.   Even though a feckless system of corporate governance can enable a CEO to essentially function as his or her own boss, including doing the board's job of evaluating his or her own performance, it is a tall order for a human being to be able to evaluate his performance as God's work.   To be sure, it is possible that God is an intelligent being that bestows favor on his golden stewards for doing His work.

Lloyd Blankfein may have been involved in two conflicts of interest: 1) that of having excessive power over the board whose principal task it is to oversee him, 2) having communicated with GS alums in high posts in the U.S. Government (e.g., Hank Paulson) and perhaps having them enact policies on GS's behalf.   It may be that institutional and personal conflicts of interests can become so ubiquitous that they are simply not seen by the culprits. Furthermore, it could be that the denial enabled by a tacit presumptuousness is like a white movie screen on which even doing God's work can be projected. How ironic it is, that sordid proprietary interest could operate not merely under the subterfuge of being a neutral "market-maker," but also as God's work. Such work is two degrees of freedom away from squalid greed. So it is remarkable that the two could become conflated in a mind.

[i] John Arlidge, I’m doing ‘God’s work. Meet Mr. Goldman Sachs, The Sunday Times, 11/9/09.
[ii] Thomas Jefferson to John Taylor, Monticello, May 28, 1816, in Paul L. Ford, ed., The Writings of Thomas Jefferson (New York: G.P. Putnam’s Sons, 1892-99),  XI, 533.

Tuesday, February 22, 2011

A Critique of Corporate Political Risk Analysis and U.S. Foreign Policy: The Case of Libya

Even though people the world over instinctively recoiled as reports came in of Gadhafi's violent retaliation against Libyan protests on February 21, 2011, the official reaction from the US Government was muted at best. The refusal to act on an intuitive response to immediately remove the Libyan dictator's ability to wantonly kill people resisting his right to rule may have come from concerns that the mounting tumult of a change of government in a major oil-producing region of North Africa could cause even just a disruption in the supply of crude. Indeed, even the mere possibility was prompting a spike in the price of oil (and gas)--what one might call a risk premium. Even the prospect of an ensuing nasty electoral backlash from consumers having to face a possible increase in their largely non-discretionary gas expense was not lost on their elected representative in chief at the White House. 
 
Even five days later, after some serious press on the rising price of gasoline hitting American consumers, the most the president would do is proffer a verbal "demand" from afar that Gadhafi leave Libya.  "When a leader's only means of staying in power is to use mass violence against his own people, he has lost the legitimacy to rule and needs to do what is right for his country by leaving now," the White House said in a statement. The dictator must have been shaking in his boots.  In actuality, Gadhafi had lost his legitmacy to rule five days earlier, and by the day of the statement the American administration could have been actively involved with willing EU states in stopping him inside Libya. Given the progress of the protesters-turned rebels and the behavior of Brent crude that week, the interests of the American consumer (and Western oil companies, as well as the business sector over all) were by then firmly in line with an enforced regime change in Libya.  Oddly, the old dogma of an absolute governmental sovereignty was colluding with an inherently excessive risk-averse corporate political risk methodology to hold America back from acting as midwife to a new political awareness breaking out in the Middle East.

On the day of Gadhafi's self-vaunted shooting spree, Brent crude benchmark vaulted past $108 a barrel (settling at $105.74, a two-year high).  On the following day, it rose to $111.25. On the first day of March, the Dow Jones Industrial Average dropped 168.32 points, or 1.38%, to finish at 12058.02, its third triple-digit decline in the past week. Oil futures on the New York Mercantile Exchange, already up 6% this year, jumped 2.7% to settle at $99.63 a barrel.  Brent Crude in London hit $115.42 a barrel, the highest settlement since Aug. 27, 2008.The graph below shows the change in oil, though the change looks astounding in part simply because the graph only goes to 15%; were it to go to 100 percent, the picture might seem less dramatic.
 
The Wall Street Journal had reported already on February 21st that the rise was "driven by increasing unrest in the Middle East." Specifically, worries that the turmoil in Libya was curtailing output of that country's oil were said to be driving the price climb. However, USA Today cites Darin Newsome, an energy analyst at DTN, as pointing to the role of speculators around the world as propelling the price of oil. "The flow of money plays an enormous role in the direction, speed and volatility of these markets." In fact, the market mechanism itself may be flawed because speculators could push commodity prices out of sync with the underlying supply of the respective commodities. Turmoil in Libya cannot be blamed for the ensuing “creation” of artificial value (such an increase, by the way, had fueled the housing bubble in the US that came in for a hard landing in 2008). In fact, the rise in world oil prices began before the final third of 2010—before the prospect of widespread popular protest in the Middle East was realized. Indeed, the climb during the last third of 2010 looks a lot like that which took place in the first third of 2009 (during a recession). It was not until well into February, 2011, that the turmoil in the Middle East appeared, according to MSNBC, “to pose limited risk to global oil supplies. Neither Tunisia nor Egypt produce oil or gas.” Such “limited risk,” besides being mitigated, cannot very well be projected back well into 2010 to explain the rise in the price of gas.



Incidentally, another interesting feature of this graph is the sustained drop in 2008, before the financial crisis in September (and the U.S. Presidential election in November!).  The “V” pattern at the end of 2008 is classic “electoral.” It suggests that the price of gas may be very attuned to the electoral interests of those in power, and therefore to government policy. My contention in this essay is that this dynamic was alive and well in Washington when Gadhafi was turning on his own people.

 
 

Sources:

Jerry DiColo and Brian Baskin, "A Stealth Comeback for $100 Crude Oil," The Wall Street Journal, February 22, 2011, pp. C1, C3.

http://online.wsj.com/article/SB10001424052748704506004576173961240139414.html?mod=ITP_moneyandinvesting_0

Gary Strauss, "If Unrest Spreads, Gas May hit $5", USA Today, February 22, 2011, p. AI.

http://www.msnbc.msn.com/id/41739499/ns/business-personal_finance/

http://www.nytimes.com/2011/02/24/business/energy-environment/24oil.html?_r=1&hp

http://www.nytimes.com/2011/02/23/business/global/23oil.html?ref=todayspaper

http://www.msnbc.msn.com/id/41785849/ns/world_news-mideastn_africa/

http://www.nytimes.com/2011/03/18/world/africa/18nations.html?hp

Monday, February 21, 2011

Media Wars: A Case of Over-Reaching?

During the summer of 2010, as commentators at Fox, CNN, and MSNBC were arguing, they referred to their own arguments as “trench warfare” and “hand-to-hand fighting.”  Real soldiers would doubtless dismiss such descriptors as attempts by children to count as adults—as something more.  The soldiers would be correct, of course. Insulting or criticizing another person does not constitute fighting in the sense of warfare. Someone at MSNBC calling someone at Fox a racist does not come close to shooting someone with a rifle or even slugging someone with one’s fist.  The protesters in Libya who were being shot at by their own government in February, 2011, would shake their heads in disbelief in hearing of the "war" among media personalities.

Lest it be objected that this makes little matter, the propensity of the media “personalities” to over-reach covers their depiction of news.  For example, they use “crisis” far too often.  For example, there really was a crisis in September 2008 on the Thursday evening in which Ben Bernanke and Henry Paulson told congressional leaders that unless they showed some intent to act, there would not be a financial system by the following Monday. No financial system on Monday: this is what it means to be in a crisis mode. To call the BP oil in the gulf a crisis more than two months after the explosion (and weeks after the well had been capped) a "crisis" does not compare, and is thus a case of the media over-reaching. By its very nature, a crisis is short-term.  The protest in Egypt, for example, quickly reached a do or die point. Such is crisis mode.  So too, when the planes shot at the protesters in Libya: the resulting turmoil, which can only be sustained as such for a brief period before a decision has to be made one way or the other, instantiated a crisis mode.  For republicans or democrats in Congress to refer to budget talks as though they were at a crisis utterly pales by comparison. Yet journalists perpetuate the verbal inflation and get paid in increased attention.  In the process, "crisis" itself becomes like the story of the boy who called wolf too much and was practially ignored when the wolf finally showed.

Every presidential address is vaunted as critical. “The President needs to say X or the sky will fall.”  No mention is subsequently made of the sky still up there even though the President omitted X.  In other words, there is no mechanism of accountability on journalists and pundits when they over-reach. The media companies themselves seem inert to any need for self-regulation. So the media wars are allowed to intensify even beyond "war."  Fox News and MSNBC must somehow sustain and intensify their "battles" so people will continue to watch the spectacle. In the meantime, the real news is sidelined.  The medium becomes the message and the voters are not so informed.  So goes a republic in decline.  So goes a culture in decline.

Libya and the World: A Higher Calling

On February 21, 2011, Libyan military aircraft fired live ammunition at crowds of anti-government protesters in Tripoli. "What we are witnessing today is unimaginable," said Adel Mohamed Saleh, an activist in the capital. "Warplanes and helicopters are indiscriminately bombing one area after another. There are many, many dead." Arabiya television put the number killed on that day alone at 160. Gadhafi's son had vowed on television the day before that his father and security forces would fight "until the last bullet." I suspect that few people were surprised to find that Gadhafi would mount a sustained vituperative effort against the pro-democracy movement that was sweeping through the Middle East. "These really seem to be last, desperate acts. If you're bombing your own capital, it's really hard to see how you can survive, " said Julien Barnes-Dacey, Control Risks' Middle East analyst. "But I think Gaddafi is going to put up a fight ... in Libya more than any other country in the region, there is the prospect of serious violence and outright conflict," he said. As the world received reports of the massacre, a latent question not being asked was whether the world (or even a coalition therein in case of a holdout like China) has the right or an obligation to intervene militarily to stop the offending regime against its own defenseless people. I contend that there is such a right and moral obligation--meaning that national sovereignty does not extend to crimes against humanity. Sadly, at the time of the Libyan protests and Gaddafi's retaliation, the world's government offiicals were still largely impotent and disorganized.

Even if not sufficiently for his regime to collapse, Gadhafi's obstinancy was being undercut right out from beneath him. As the the military was escalating its attack on unarmed citizens inside Libya, something else--something rather astonishing--was happening. Rather than putting up a united front to the world against the opposition, the government showed itself to consist of men whose participation in Gadhafi's government was not unconditional. Could it be that the Nuremburg verdicts against the Nazis in 1948--the ruling that blind obedience is not excuse for even government offiicals and employees being held accountable--was finally being heard?  That is to say, might it be that in addition to conscience, the emerging judicial enforcement at the International Criminal Court was having a slight (but significant) impact even as crimes against humanity were being committed?Libya's former ambassador to the Arab League in Cairo, Abdel-Moneim al-Houni, who a day earlier resigned from his post to side with protesters, issued a statement demanding Gadhafi "be put on trial along with his aides, security and military commanders over the mass killings in Libya." Were the former ambassador's warning having a real impact in real-time on government offiicals, this would evince real progress for the human race. Specifically, the realization by oificials while they are in power that they might be held accountable for their role in harming their own people could, with the help of conscience, mitigate how far a regime can go in "punishing" its people for their natural proclivity to protest injustice.  There is some evidence that government officials who might have held tough a decade earlier were having second thoughts and, crucially, acting on them.

For example, as the Libyan military was trouncing on marching mourners, Justice minister Mustafa Abdel-Jalil reportedly resigned from his post to protest the "excessive use of force against unarmed protesters." Also, at least two Libyan air force pilots defected to Malta rather than shoot on defenseless citizens. Lastly, Libyan diplomats abroad explicitly backed off supporting the country's dictator. For example, a Libyan diplomat in China, Hussein el-Sadek el-Mesrati, told Al-Jazeera, "I resigned from representing the government of Mussolini and Hitler." Even more astonishing, Libya's ambassadors at the United Nations called for Gadhafi to step down as the country's ruler. Deputy Ambassador Ibrahim Dabbashi said that if Gadhafi does not relinquish power, "the Libyan people will get rid of him." The staff of Libya's mission to the United Nations declared allegiance to the people of Libya, instead of to Gadhafi, a spokesman said on the day on which Libyan jet fighters turned on the citizens they were to protect. Traditionally, it has been thought that governments are the members of international bodies such as the UN.  That it might actually be the people of a country who are represented in a confederation would be revolutionary (this is typically thought to be in part the case in a federal government, rather than in an alliance or strictly international organization). Ambassadors representing a regime conditionally goes along with al-Houni's statement even on the day when bullets sprayed on the Libyan people from the air, "Gadhafi's regime is now in the trash of history because he betrayed his nation and his people." In other words, Gadhafi's regime had already lost its legitimacy, and thus its right to represent the people abroad (and at home). 

To be sure, autocratic regimes are not necessarily populated by people of concience or even foresight (e.g., concerning possible prosecution at the ICC or even domestically). When Gandhi was asked how non-violent non-cooperation could ever hope to work against an invading and occupying Nazi force, he acknowledged that many would be harmed for the sake of truth, but ultimately the dictators are already destined to the trash-bin of history. Progress comes by painfully slow steps in this world of flawed humanity.  One novelist on the American Civil War observed, if we are angels, then surely we are killer angels. Was it some cruel joke? one might ask God.  Why?  Yet if the pro-democracy movement in the Middle East could teach us--meaning all of us--anything, it might be that we, acting together, can push the boulder a bit further up the hill. We need no longer accept the existence of regimes that betray their people, and in February of 2011 the world realized its efficacy in making this so. It is as if in one voice we finally exclaimed, "No, we will not go softly into the night. We will stand up and they will back down!"

As the people in the Middle East were pushing up against the dead weight of history, the rest of us were with them--indeed, being transfixed and humbled by them as they marched against dazed tyrants who had not yet realized that their day had already passed quietly into the night to be replaced by the first light of another dawn. Perhaps, just perhaps, there is a progression in the eternal recurrence of night and day.

Source: http://www.msnbc.msn.com/id/41700027/ns/world_news-mideastn_africa/

Sunday, February 20, 2011

Political Black Holes: On the Power Behind the Throne

Our galaxy, the Milky Way, has a black hole. If this is news to you, there is no need to go hide under a rock. It turns out our black hole is not the biggest by far, and it doesn't spew out a lot of excess energy that falls into it. Even so, it is ours, and we can be glad that we have one of our very own even if it isn't the biggest one on the block. In case you are interested in seeing it’s baleful look in a picture, I’ve got bad news for you; it is invisible. No light can bounce off it.  You are probably wondering how the scientists found it.  Well, they knew that black holes are in the center of galaxies, so the crafty lab coats used ultraviolate light to find our center because there is too much gas there for much there to be visible to us.  The scientists noticed that the speed of stars speeds up around a certain point and posited the existence of a highly-dense black hole.

Using the phenomenon of black holes as an analogy, political "scientists" might investigate whether power, whethere in business, government or society, tends by its very nature to consolidate. In the Micheal Moore documentary on capitalism, two members of congress point to the immense power of an anti-democratic corporate banking elite that was able to turn around the House vote on the bank bailout (TARP) using the democratic leadership as runners. If so, such power was invisible to the public. Likewise a black hole is of course invisible. In the case of the banking elite, we couldn't point our fingers at who exactly gave the marching orders that turned around the no-questions-asked government loans to the banks too big to fail.  Nor do we, or will we, know who told the U.S. Senators: hands off meddling in foreclosures.  Indeed, we shall have no idea whether a power behind the throne told Congress not to even debate the alternative of giving the TARP money directly to home borrowers in trouble.  That this was not seriously debated for foreclosures involving mortgages that banks and mortgage companies should not have given in the first place hints of the existence of a massive albeit hidden political black hole. Finally, such a black hole may have been behind the administration's decision not to push for banks too big to fail to be carved up while extant rather than simply "orderly liquidated" once they have fallen under their own weight.

Neither the American people nor the American media companies go far enough in investigating even the existence of invisible black holes in the American political universe, let alone what damage they do from the standpoint of the public or common good.  Micheal Moore suggests that Citibank and Goldman don’t fear popular election much because they expect the 1 person, 1 vote thing won’t turn on them because most people think they could be in the elite too. The financial elite is 1% of the vote; 1% of the population holds 90% of the wealth, so if the other 99% happen to wake up and notice, they might take back the reins. The big business would be worried, but, alas, Wall Street is not shaking in its golden boots. As to why, I would add to Moore’s explanation by pointing to the extent to which Americans are manipulated without even knowing it.  Lest it be missed, the gaint media companies are corporate too.

Is it an accident, for example, that so many stories on Afganistan pop up when it is in the interest of the defence contractors? Are they simply using the people to urge Congress to support a surge?  I would call this “direct manipulation” because we are being summoned to debate what has been put on the table for us.   The other kind is “indirect,” which involves a political black hole keeping an issue or policy-option off our radar screens.  President Obama’s suggestion, for example, that the banks too big to fail be reduced in size (and money) so they would not be so dangerous in failing, quietly went away. In looking for indirect manipulation, the important thing to notice is the absence of  any visible event or change that could explain the removal of a proposal by some new issue being covered by the media. We ought to be examining what political black holes do not want us to talk about because of private interests. For instance, we now know that health insurance companies gave their surrogates "death panel scare stories" to fan out discussion of a public alternative in health insurance.  Scaring a proposal off the radar screen is among the silent weapons used by political black holes.  Again, the source of such weapons is invisible.

So like sheep, the American people is led to debate or focus on something or to forget something else, In the process, we are unwittingly giving up, or failing to grasp, our democratic power, which can be used for the public good. To be sure, there are excesses and drawbacks in democracy and these too should be discussed, but there are hidden dangers to political black holes, and we miss these if we do not even know that such things exist.  That is to say, the democracy we do have may be rather wan in comparison to the gravity of the political black hole at the center of our political society.

Perhaps the question on your mind is:  So how do we get it back?   It might involve nothing short of waking up out of the Matrix.  So many of us don’t realize how much we are being manipulated.  Realizing it, and not tailoring our thoughts and discussions along its lines will wake others.   Once people start waking, we can start to look for candidates who do not, like Obama, take a $1 million from Goldman after promising real change.  We need candidates willing to forego being bought out by the elites who sense that democracy might possibly get the upper hand in an election.  Pay particular attention to the matter of teeth in such candidates’ proposals with respect to big business…and ask at their speeches whether they are taking money from the establish that has a vested interest in the status quo.  Don’t buy the “I’m not influenced by money.”  …which should be treated as a laugh line.   If you find genuine candidates willing to effect systemic change even where it is at the expense of the big corporate players, know that the elite will offer such candidates so much if the elite view the candidates as viable and  not under their control.  Control, by the way, can be more subtle than using a leash.  This is perhaps my major point here…political black holes are invisible and yet their anti-democratic gravity is HUGE…even as it is in a tiny space, or office.

In the Roman Empire, the games in the arena (which means “sand” in Latin) were a devise to distract as well as mollify and entertain the masses.  Today, we have American Idol and the Super Bowl, as well as the World Series.  Besides their entertainment value made possible by the talent involved, these idols are effective in gravitating popular attention…and this can be useful to the extent that the US is a plutocracy (i.e. ruled in the interest of the top 1% of the wealth) and vested powers fear the 1 person, 1 vote power of democracy.  But as Micheal Moore points out, Citibank and Goldman Sachs can rest easier knowing that many of us don’t use the power of the vote to take from the banks because many of us believe we might be among the plutacracy one day. 

I would add that we tend to be easily manipulated into following the media’s current (which, kein Zufall, tends to move around the interests of the major houses so as not to disturb the islands of capital).   We stop wondering about the distant promises to do something about the banks too big to fail because the media has conveniently stopped reminding us.  We forget that an option is to break up the banks too big to fail (which, by the way, have gotten bigger since September, 2008 and are still active at the casino).  We unthinkingly join the media in debating Obama’s banking consumer protection proposal, as though that were primary.  In other words, Goldman Sachs, which was Obama’s largest campaign contributor according to Micheal Moore (over $1 million), is content to have us debate a potentially pain so we will be appeased by Obama’s pledge of “real change” and not ask, demand, or VOTE to apply anti-trust law to financial houses.   In short, we allow ourselves to be dupped and we don’t even know it.  We don’t even realize we are taking our eyes off the eight ball.  Goldman lets Obama have four more years and 1 person, 1 vote is once again not a threat to either Goldman or the change agent that the bank bought.  Don’t expect Obama to rock the boat in bringing any real change that is not in the interests of the most powerful of the corporations.  Obama’s challenge is to show us just enough that looks like real change while not acting outside the interests of his corporate backers.  However, aren’t real change and status quo vested intersts mutually exclusive?  If so, how does Barak Obama get around this?  He gives us just enough to appear…   Meanwhile, the systemic change that is needed on the players at fault in September, 2008, goes by the wayside and we remain vulnerable even though We the People are convinced that a new consumer protection agency will do the trick.  The trick, ladies and gentlemen, is on us–and we don’t even know it.  We don’t know what we don’t know…while we presume we know it.

In 2009, Moammar Gadhafi of Libya gave a speech  at the annual opening of the General Assembly at the UN in New York City.  Substantively, he pointed to the drawbacks in having the UN remain in New York.  He also advocated a permanent seat for the African Union in the Security Council.   Fifty-three states are represented in that Union.  In an interesting twist, he remarked that the US contains fifty countries, so Africa too deserved a permanent seat.  I was utterly surprised that the man who was disorganized and sporatic in his delivery (and whose government would kill hundreds of unarmed protesters in 2011) could grasp the nature of the US in terms commensurate to the AU. He added that the EU should have a seat.   This makes a lot of sense because it is not fair for three of the EU’s states to have seats while all of the 50 United States have one. It occurred to me in listening to his speech that he understood the nature of the US as an empire-scale polity better, actually, than most contemporary Americans do. This is a bad commentary on the condition of civics classes in American high schools.  So I was surprised to find the mainstream media report the speech simply as “disorganized" without reporting any of the substance, as though there had been no serious content whatsoever.   Someone must have wanted to discredit Qaddafi for political or economic reasons.   The summary verdict was so immedate and total that none of Qaddafi’s content was covered.   The media’s treatment had all the footprints of a hidden strategy--that is, of a black hole's pull.  If I am correct, I’m left surprised that the subterfuge itself could be so blatant.  For a journalistic standpoint, the reporting was really bad.   Alternatively, the journalists could have reported what the man had said (as well as on his style and approach) and have left it to the readers to decide whether the content should be dismissed due to the style.   Something else was going on.  I’m just not sure what. I contend that something else typically goes on in terms of what is debated in the public discourse via the media. The invisible source steering and pruning what travels across our public radar screen is none other than a political black hole: a very dense concentration of private power functioning akin to an invisible elephant in a small living room. One person senses a trunk--another a leg--but we as a people miss the very existence of the elephant.  We are too distracted, and this is no accident, as it manifests by the very black hole that we do not suspect exists.

In short, both the content and frequency of topics reported by the media bear traces of the black whole that they are orbiting. As long as the source of the gravity is invisible, the black hole will continue to be quite useful.  Put another way, as long as Americans take the press reports as simply journalism, we will miss what is going on behind the scenes and therefore continue to be subject to being manipulated.  Micheal Moore asks: when will democracy ascend over the power of big business?  It is possible, but not probable.   This, by the way, is the expression that Immanual Kant uses in discussing his Kingdom of Ends (treating rational beings as ends and not just as means). Beyond the latent or actual subterranean power of corporate America over our public airwaves and legislative chambers, we ought to reflect on the threat to a republic in there simply being political black holes.
  
See: Nova on Black Holes (http://www.pbs.org/wgbh/nova/blackhole/)

Corporate Social Responsibility: Too Often a Weapon

Typically, responsibility is something people working in a business presume applies to the other guy…whether a customer, supplier or distributor.  The idea is that then the other guy will pay for the problem.  That someone working in the business might have been at fault is not even considered, at least outwardly, in this mentality of otherness-responsibility.  Responsibility here means “I won’t pay; you must pay!”  It is essentially immature self-centeredness and cheapness used as a weapon.

In general terms, responsibility follows, or depends upon, there being some action thought to be required of someone.  Only if Susan is to pick Billy up at practice at 4:30pm is it her responsibility to do so.  The attribution of responsibility depends on the premise that Susan is required, or has agreed, to make the pick-up.  Were it unclear whether she or say Mary were to make it, Susan could reply to someone’s claim that she is responsible for picking up Billy that she is not responsible because it is Mary’s turn.  The attribution of responsibility depends on an agreement as to function or action coupled with a particular agent.   In the case of a businessperson telling a customer what the customer’s responsibility is, the customer could reply “I did not agree to do X so I am not responsible for it; in fact, you are responsible for it because your advertisement states that your firm does X.”  So disagreements about responsibility are actually disagreements as to who does what.

Corporate Social Responsibility as a movement presumes that managers do X beyond their respective firm’s maximizing or satisficing shareholder returns.   The managers have a fiduciary responsibility to act in the interests of the owners of the wealth that is the corporation because it is a requirement that the managers do so.  Expanding the managers’ functions beyond maximizing returns (and minimizing cost consistent with those returns) is a matter on which reasonable people can disagree because the question is really about what sort of society we want.   However, using responsibility as a way of imposing such an expansion beyond that which has been agreed to is to use the term prescriptively—meaning that there is over-reaching involved.   I would like managers to do Y as well as X, so I declare managers to have a responsibility to do Y (as well as X).   Responsibility really isn’t the right word here because the underlying agreement on the agent-function matter has not been established.  In other words, responsibility properly follows from a given agent-function rather than institutes it. 

Claiming that corporations have a responsibility to act in concert with public opinion or extant social norms—to the extent that it goes beyond the business profit calculus—is to use responsibility in a way that presumes more than is presently the case.  This use of the term is really an instance of ideological prescription rather than a reminder of an agreed social contract that has modified the corporate fiduciary duty to the owners of the private property.    Using the term responsibility to create an agent-action foundation puts the horse before the carriage.

So we over-reach when we say that the bankers of the commercial and investment banks that are too big to fail have a responsibility to act within public opinion on the bailout (e.g., concerning bonuses and trading on the banks’ own books).  Even if it is in the long term interest of the financial institutions that the financial system remain viable, the managers correctly point out that their responsibility (i.e., agreed upon actions) is to act in their stockholders’ interests.   To say that the big banks had a responsibility to rescue Lehman Brothers in September, 2008 even if doing so is not in their respective stockholders’ interests is essentially to express the public’s (and government’s) wish that Wall Street step up to the plate and do what is good for the system.   To make saving a bank too big to fail part of the big banks’ responsibilities, there would have to be a requirement that they do so (unless they agree that it is part of their activities).   That is to say, there would have to be a law or regulation because otherwise there is not apt to be the sort of mutual agreement out of which responsibilities can be extracted.  A person can say, “the law says you must do Z, therefore it is your responsibility to do Z.”  The response can’t very well be “Well, the law doesn’t apply to me so it is not my responsibility to do Z because I haven’t agreed to do it.”  This is not to say that a typical manager wouldn’t like to use such a line if he or she could get away with it.  Such a self-maximizing mentality makes the legal foundation of responsibility all the more important.

On the question of whether more government regulation is needed for banks too big to fail (as well as health insurance companies), I would shelve the use of the term responsibility and look instead at the mentality of managers in general (as well as in the industry in question).   Whereas the Senate can be likened to a herd of cats instinctively unwilling to be managed, a corporation can be likened to cats circling tuna.   The tuna is their required function: to act in the interests of the stockholders (typically short term).  To expand a business manager’s function to include working against systemic risk (banking) and working so all American citizens are covered (health-insurance) is an exercise in futility unless these functions dovetail with the stockholder/profit interests.  So in addition to government regulation being necessary (as responsibility is not sufficiently viable as a constraint because the agent-action foundation has not been established),  regulators would have to monitor the companies to keep the managerial feet to the fire.  Also, the regulators would have to be monitored because of the managers would have an incentive to capture the agencies that otherwise pin in the firms.  The managers will constantly be trying to turn toward the tuna.  Whether hardwired or socialized by managerial culture to do so, managers can be expected to incessantly strive for more tuna.

As an example of such striving being at the antithesis of constraint, logging companies that sold forests to the US National Parks in the mid-twentieth century continued logging even after the managers knew the sales had gone through.  Also, the managers of the banks too big to fail fought financial regulatory reform in the wake of the banks’ own culpability in the crisis of 2008.  In addition to reading this as presumption to excess, it can be interpreted as the allure of the tuna always there.  Even if a cat could feel guilty for having knocked over a vase on the way to the food, the animal would turn right around and fight efforts to thwart it from the tuna.  The guilt is extrinsic to the animal as it pursues the tuna.  That is to say, we impose ought on an activity that is simply an “is” to the cat.   As Hume points out, you can’t get ought from is.  The cat’s mentality is essentially to keep striving for tuna, which ideally (to the cat) means ignoring constraints (if possible).   If managers could routinely ignore the law when it is in their interest, it is futile to believe that they would be the sort of creatures that would allow themselves to be guiled into acting within the contours of social norms.  What I am getting at is this: In the CSR movement, there is far too much reliance on the good faith of managers of companies—as if they can be lured away from the tuna, even for a minute for a good cause. The CSR movement ignores the managerial nature, or mentality, or tries to modify it with insufficient force.   The mentality is far too intractable and the use of responsibility far too over-reaching for CSR to be viable in the real world. Essentially, the CSR movement, even in its beginnings in the 1950’s by a few well-meaning though naive businessmen, presumes Hume’s naturalistic fallacy as somehow invalid (meaning that extant societal norms can be taken as normative on their own basis and managers can be presumed to have a responsibility to act in sync with them even if doing so is not in the stockholders’ interest).

We should not rely on CSR or good corporate citizenship in lieu of government regulation when business firms (or entire industries) put us or our society at risk of harm.  The business calculus understands requirements, not “oughts,” and responsibility follows (rather than establishes) the requirements.   To presume otherwise is mere wishful thinking along with a dash of imposing, which is really the self projecting itself on to the world—making the world in its own image.

Federalism 101: Is it in the Nature of Power to Consolidate?

There is something unAmerican about consolidated power.   The financial consolidation even after the financial bailouts of 2008, is now generally known to be dangerous economically.  What we don’t typically realize is that it complements political consolidation at the empire-level of Unions such as the US and EU.  I suspect that many Americans have a baleful sense from the various manifestations of consolidation.  We have a vague sense of a trend that seems to go against what our predecessors have stood for (i.e., against centralized power…going all the way back to George III).   Let’s just say that it is in the interest of big government and big business that we continue to forget this point and continue to chase after various demons.  That is to say, the anti-democratic power that has more influence in our government than even the skeptics realize does not fear the democratic element of one person, one vote, because we are scattered.  Should we ever unite and take back our government, it would be interesting to see what the corporate elite does.  Will they allow us to remain a democratic republic, or will they tell our government officials to give us the impression that we are in control?

Lehman Bros: Insufficient Accountability in Corporate Governance

In an executive meeting at Lehman in the summer of 2008, Skip McGee told Richard Fuld and the other top executives that the market was demanding “that we hold ourselves accountable.”  Essentially, he was pushing for Gregory’s outster.  What strikes me is what he didn’t say–namely, something like, “the stockholders are holding us accountable!”  Had he said this, Fuld might have laughed. Of course, Richard Fuld was a major stockholder, so he might have viewed it as “holding myself accountable to myself.”  Given the inherent ethical conflict of interest in such a statement, I don’t think we can rely on corporate governance as a check on excessive managerial risk-taking when executives hold a substantial share of the stock.  Therefore, in including stock options in executive compensation to align executives' incentives with medium and long-term firm performance, boards should add institutional safeguards or accountability mechanisms to corporate governance. In business-speak, there is a cost incurred that boards may not be aware of in aligning executive compensation (and firm ownership) with future profitability.

The full essay is at "Insufficient Accountability."


On the Police Power of Chinese Banks: An Exception or the Rule Worldwide?

In July, 2010, a few days after the Agricultural Bank went public in an IPO bringing in $22 billion, dozens of former bank employees stealthily gathered outside the headquarters of the country’s central bank. Like many other state-owned companies, the bank slashed its payroll and restructured in order to raise profitability and make the bank more financially attractive to outside investors. By Western standards, the bank was overstaffed, a legacy of its role as one of the pillars of China’s socialist financial system. The fired bankers have no legal redress in China. In 2000, the Supreme People’s Court put an end to any hope that the legal system might adjudicate such disputes, saying that plaintiffs from state companies had no standing in Chinese courts. So the ex-bankers protest—at least they attempt to do so before being picked up by a coordinated police response. This dynamic should come as no surprise to anyone.  What might not be so apparent is the ability of the banks to use the police to go after recalcitrant ex-employees. The banks are so powerful that they can enlist the local police to keep an eye on the most troublesome employees, often following them to Beijing, where their protests and petitioning can prove embarrassing for executives back home. One ex-employee said, “The head of my branch said he would never give me my money and spend any amount to fight me to the end.”  I contend that it is troubling that the director of a bank branch whose mentality it is to spend any amount of money to fight an ex-employee has police-power at his beck and call.  Beyond the lack of an independent judiciary in China, the possibility that a banker in any country could have a police force at his or her ruddy fat hands is something that ought to be investigated.  While it might be tempting to relegate such a scenerio exclusively to China, European and American states are most likely not immune either.

Source: http://www.nytimes.com/2010/08/16/world/asia/16china.html?pagewanted=1&_r=1&dbk

Consolidation in Russia: Federalism and Democracy at Risk

United Russia, the party led by Prime Minister Putin, decided in August, 2010 not to submit the name of the governor of Kaliningrad, Georgy V. Boos, for reappointment. The decision appeared to put pressure on governors to do more to ensure the satisfaction of those they govern, or to at least keep a lid on dissent. Governors had been popularly elected in Russia until a 2004 decree by Mr. Putin, then Russia’s president, that gave the president responsibility for appointing them. In that decree, the president is to select governors from a list of candidates drawn up by the governing party. Critics have said that the practice has made governors beholden to the Kremlin and insensitive to the popular sentiments. This can be problematic on two grounds.

In an empire-scale polity the size of Russia, which is inherently diverse,  insensitivity to popular sentiments can create pressure that could cause the federation to eventually explode. Being geographically separted from the rest of Russia and comparable to a small country, Kaliningrad is undoubtedly in a position to have expectations arise from its people concerning some extend of self-governance. As Russia treats its constituent republics like a republic’s provinces, the people in the republics are likely to take offense and demand more in terms of self-governance more in line with that of the EU’s states.

Secondly, the appointment power evinces a democracy deficit. The inability to elect governors was one of the central grievances when 10,000 people protested in Kaliningrad in January, 2010 to call for Mr. Boos’s ouster. Konstantin Doroshok, the head of the Kaliningrad branch of the opposition group, Spravedlivost, said of United Russia’s decision to deny the governor a second terms, “On the other hand, it is important to understand that the people have not been given the most important thing: the real opportunity to independently elect governors.” To the extent that the protest was over the constitutional change rather than Georgy Boos in particular, United Russia may have taken the wind out the Baltic sails without having to directly address the raison d’etre of the complaint. Even so, the pressure for more self-governance is likely to intensify in Russia’s republics. In excessively consolidating, Russia may go the way of the USSR.

Source: http://www.nytimes.com/2010/08/17/world/europe/17russia.html?_r=1&scp=2&sq=russia&st=cse

Electoral Fraud in Afghanistan: A Precursor to the Protests in the Middle East?

The UN’s Electoral Complaints Commission recommended in 2009 that Afganistan’s Independent Election Commission invalidate 210 polling stations where the ECC found “clear and convincing evidence of fraud.”  The IEC in turn announced a run-off election because Karzai no longer had over 50% of the vote.  MSNBC reported that “the Karzai-influenced election commission may refuse to call for a runoff.” CNN reported that Karzai and Abdullah were trying to “cut some sort of deal” on a coaliation government that would have obviated, or skirted, a run-off.  Such a compromise would have been woefully inadequate from the standpoint of democratic process.

Even Karzai’s announcement that he would go along with a run-off can be read as presumptuous.  If he didn’t want to go along with it, he need not have taken part.  That one candidate’s feels his refusal to participate would or should cancel an election suggests a rather squalid presumptuousness that ought to be made transparent to the voters.  It is a sad commentary on representative democracy that the Afghan IEC’s decision was probably dependent on Karzai having been under international pressure to agree to the run-off.   Is it too idealist to insist that the candidate should have been informed by the IEC of its decision rather than permitting it?   For one of the candidates to have had a de facto veto on the election commission evinces a lack of democratic infrastructure.  It is like a cart pulling the horse.

In retrospect, we know that Karzai’s victory was fraudulent, even though he continued on in the campaign as a viable candidate.  What does it say when fraud is not punished?  Is having a run-off sufficient punishment?  Were all of the candidates benefitting from the fraud tossed out and a new open election held, would this be so catastrophic? I contend that the protests that occurred in the Middle East in 2011 for greater democracy can be interpreted as having been occassioned by years of frustration stemming from the sort of electoral facade perpetuated by dictators such as Karzai.  If so, the costs of not nipping electoral fraud in the bud far outweight any trouble involved in insisting on electoral accountability.  In the case of the U.S., foreign aid to Afghanistan could have been cut off in 2009 unless or until an open and fair election could be verified. With such a substantive signal given and repeated with regard to other dictators in the Middle East who were using the facade of democracy for legitimacy, some of the mass protests taking place two years later might have been obviated and lives saved that were otherwise lost.

Sources:
http://cnnwire.blogs.cnn.com/2009/10/23/karzai-challenger-prefers-opposition-to-coalition/
http://www.msnbc.msn.com/id/33394277/ns/world_news-south_and_central_asia/

Prohibiting Interracial Marriage: Testing the Limits of Tolerance in a Federal Empire

In October, 2009, it was widely publicized in the press that a justice of the peace in Louisiana had been refusing to marry interracial couples (what if both people are multiracial?). He was subsequently fired. Keith Bardwell, justice of the peace in Tangipahoa Parish, said it is his experience that most interracial marriages do not last long. "I do ceremonies for black couples right here in my house," Bardwell said. "My main concern is for the children." As astounding as this sounds in the twenty-first century in a modern society, the case demonstrates the thesis that an empire, or Union of many States, is inherently diverse--incredibly diverse in fact. Europeans tend to view the United States as though it were itself akin to a state (i.e., homogeneous). In truth, the United States are indeed as diverse as is the European Union (language is not the only basis of diversity).  A person in Boston reading a newspaper about the justice in the peace in Louisiana could be excused for thinking for a moment that Louisiana is another country. To be sure, the large states in the U.S. are equivalent in size to the large member-states in the E.U. Territory does matter in terms of cultural diversity.

The full essay is at Essays on Two Federal Empires.


Health-Care Insurance Reform: A Spectrum of Alternatives With Respect to Federalism

In 2009, the U.S. Senate’s majority leader, Harry Reid, proposed a government-run “public” health-care insurance option with an “escape hatch.”   According to The New York Times, “A state could refuse to participate in the public insurance plan by adopting a law to opt out.”    While this proposal would barr a State refusing the public option from participating in the coops that are also a part of Reid’s proposal, the basic “opt out” arrangement is in line with federalism and, moreover, with the inherent heterogenious or diverse nature of an empire spanning across and continent and beyond. In contrast, Olympia Snowe’s preference for “a fallback, safety-net plan” that would trigger the public option in States where insurance companies fail to offer affordable plans is antithetical to federalism because the States would have no choice in whether the plan was triggered.

The approach most in line with federalism would be for the health-plans to be designed in the State governments, with the U.S. Government focused on matters that the States cannot (not will not) do, such as presenting a united foreign policy to the world.  If there is a lowest common denominator for health-care in the US as per the fundamental principles of the Union, a basic program passed by the U.S. Government would be consistent with also having State plans.   Next closest, the U.S. Government would supply money for health-care, which the State governments would decide how to spend.  Even less in line with federalism would be the design of the programs being done by Congress and the WH, with separate opt-outs for the public and coop insurance plans.   Reid’s proposal was less in line with federalism, and finally, as least in line with it, was Snowe’s preference.