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Saturday, May 7, 2011

Are We Paying for Speculators at the Pump?

According to the Huffington Post, “Oil prices took a nosedive [on May 5, 2011] in a historic selloff, erasing weeks of gains and indicating that the months-long climb in energy prices may have hit a ceiling. Crude oil plunged 10 percent as startled investors unloaded their positions and a weeklong decline accelerated into an outright freefall. The price of U.S. crude went from triple digits to double digits, falling below $100 after opening at close to $110. Brent crude, a European benchmark, lost $12 at one point in a sell-off that exceeded the one following Lehman Brothers' collapse.”  The question, for course, is why, the answer of which can lead us to consider some public policy recommendations. Understanding the previous price rise is a first step both to answering this question and for evaluating public policy solutions.

The price of oil had been increasing, according to the Huffington Post, “as fighting escalated in the Middle East and investors feared a supply shortage.” Even as the Organization of Petroleum Exporting Countries was pledging to correct any oil supply disruption, the price of a barrel of crude continued to rise. Before the drop, Brent was up 50 percent compared to the same time the year before. Indeed, the rise could not be explained in terms of actual supply being threatened, as Libya represented only 2 percent of world supply at the time.

The fear was likely of a domino-effect that could potentially compromise even Saudi crude—as if Sunni protesters in Bahrain would spill over into Saudi Arabia (rather than tanks from the latter “spilling over” into Bahrain).  The fear, in other words, may have been exaggerated—even facilitated by speculators taking advantage of the general sense of instability in the Middle East. "Clearly these markets were overblown," said Nariman Behravesh, chief economist of IHS Global Insight. "We've been saying all along the fear factor has probably added 10 to 15 dollars to the price of a barrel." The ensuing “freefall” might have been a correction for this “fear factor.”

However, that the oil-price drop was accompanied by other commodities and even stocks could suggest that larger forces were involved. According to Reuters, “World stocks fell and the 19-commodity Reuters-Jefferies CRB index dropped more than 4.9 percent, heading for its biggest weekly decline since December 2008.” An oil-centered drop alone could be expected to result in higher stock prices as expected lower gas prices would be expected to have a stimulating effect on the U.S. economy. So it would appear that broader factors were at play—things that could have triggered the fear-correction.

                                The Huffington Post 

Reuters reports that “(w)eak economic data from Europe and the United States fed concerns that have battered commodities all week. German industrial orders fell unexpectedly in March while U.S. weekly jobless claims hit eight-month highs, sparking a fourth day of profit taking in early trade. . . . Additional pressure came from news OPEC was considering raising formal output limits when it meets in June to convince oil markets it wants to bring prices down and reverse the impact of fuel inflation on economic growth.” However, it is not clear that the market was being so rational.

"This is just a market that rolled over and started feeding on itself," said John Richards, head of North American strategy for the Royal Bank of Scotland, according to the Huffington Post. "There was no triggering single event of news that would account for this. It's just much more the market's own internal dynamics taking prices down here," Richards added. “Internal dynamics” sounds a lot better than “feeding on itself.” The latter implies a growing disjunction between price and the “underlying” supply and demand for the commodity, whereas the former intimates a self-sustained system tending to equilibrium. 

Broadly speaking, the question may be whether a market for X tends internally to a homeostatic state of equilibrium or a schizogenic condition wherein a maximizing variable breaches any equilibrium-enforcing features. In ecological terms, by analogy, the question is whether a species tends to maximize its growth even at the expense of the overall ecosystem. In terms of the oil commodity market, the question is whether people simply betting on the price without any intended future use effectively divorce the market price from the actual and expected supply and demand. Moreover, does the disjuncture increase such that the betting acts as a maximizing variable at the expense of any equilibrium-tending mechanisms of the market itself?

Even if the “freefall” drop in the price of oil evinces a return to equilibrium closer to supply and demand, the disjuncture itself caused people to put off vacations and spend less on even necessities, and generally feel poorer. There is thus an ethical question regarding the legitimacy of betting on a commodity that people need. This includes not only oil, but food as well. Specifically, is the freedom to bet on necessities (even if necessities in the short run) worth the ensuing harm to consumers? Moreover, is trading on a commodities market inherently intended or designed for bets or, more narrowly, to arrive at a price whereby consumption demand meets supply? What, in other words, if economic liberty undoes the purpose of a market?

According to Bart Chilton, a top regulator at the Commodities Futures Trading Commission (CFTC), the number of speculative bets on oil and food were at record levels at the time of the price increases in both oil and food. President Barack Obama created an oil market fraud group in April to provide enhanced regulatory scrutiny of potential fraud and manipulation in the oil futures and derivatives markets, but most speculation was perfectly legal at the time so the reach of the group was rather limited in comparison to the problem.

Eric Holder, the U.S. Attorney General, wrote in a letter to the group, "Of course, there are lawful market forces that lead to price fluctuations and to differences between wholesale and retail price trends in these markets.” He urged the group “to identify whether fraud or manipulation played any role in the wholesale and retail markets as prices increased. If wholesale prices continue to decrease, fraud or manipulation must not be allowed to prevent price decreases from being passed on to consumers at the pump." However, manipulation in the form of betting was legal at the time. Even so, the financial reform bill passed in 2010 requires the CFTC to craft rules reining in excessive speculation. Nevertheless, citing inadequate market data, the agency failed to meet a key deadline on those rules in early 2011.

Accordingly, U.S. Sen. Bernie Sanders (D-VT) sent a letter to President Obama on the day of the “freefall” urging that regulators impose limits on oil speculation. “There is mounting evidence that the skyrocketing price of gas and oil has nothing to do with the fundamentals of supply and demand, and has everything to do with Wall Street firms that are artificially jacking up the price of oil in the energy futures markets,” Sanders wrote. “In other words, the same Wall Street speculators that caused the worst financial crisis since the 1930s through their greed, recklessness, and illegal behavior are ripping off the American people again by gambling that the price of oil and gas will continue to go up.” The question is whether “artificially jacking up” prices of commodities that people need ought to be illegal, and, if so, whether such a law could even be enforced.

Should futures traders be required to take delivery and use the commodity they have purchased? If so, people seeking to hedge risk may not be able to do so. Is not the “too big to fail” story about too much risk? Perhaps other means of hedging could be used. Furthermore, it may be that the government officials were not going far enough structurally. Were they to have incorporated anti-trust law, applying it strictly, perhaps a more competitive oil market would obviate the baleful effects of speculators. Even if there would be some opportunity costs in the reduced economies of scale enjoyed by oil companies (and gas stations), a market mechanism running on more competition would be worth that cost to the particular firms. The common good outweighs that of individual companies.

In going after “excessive” speculation or oligopolies, the devil may be in the details. For example, regulation may be difficult to write—assuming the corporate lobbyists do not obstruct it from even getting to that point (e.g., the failure of the CFTC to issue regulations)—not to mention enforcement. In a system of corporate capitalism, moreover, representative democracy may not be able to provide a homeostatic remedy after the horse has run out of the barn.

Click to add a question or comment on speculators and the oil market.

Sources:

Matthew Robinson, “Oil Crashes 10 Percent in Record Rout,” Reuters, May 5, 2011.

William Alden, “Oil Prices Plunge in Record Sell-Off,” The Huffington Post, May 5, 2011.

Zack Carter, “Eric Holder to Fraud Squad: Oil Price Plunge Should Benefit Consumers,” The Huffington Post, May 6, 2011.

Friday, May 6, 2011

On the Eclipse of Russian Federalism: Implications for the E.U.

Dmitri Medvedev, President of the Russian Federation, fired Yuri Luzhkov in September, 2010, after Luzhkov, the mayor of Moskow (legally a governor of a region), had questioned the president’s fitness to rule.The conflict turned into a highly unusual spectacle because such defiance of the country’s leadership by a senior official rarely occurs in public. “It is difficult to imagine a situation under which a governor and a president of Russia, as the chief executive, can continue to work together when the president has lost confidence in the leader of a region,” Medvedev said. The state-controlled television channels, which rarely if ever voice criticism of party leaders, suddenly went after Luzhkov, signaling the Kremlin’s displeasure with him. They broadcasted programs that suddenly questioned his performance and suggested that he was responsible for corruption in Moscow.  To be sure, he had been criticized for reigning like an autocrat, muzzling dissent and allowing blatant corruption to flourish. During his tenure, his wife, Yelena Baturina, obtained much of the construction business in Moscow, becoming one of the world’s richest women. However, it was criticism of Medvedev, rather than corruption, that costed him his job.  We can conclude more generally that the governors of Russia’s regions, which are equivalent to the states of the E.U. and U.S., are not free of the federal government.  In actuality, therefore, Russia is not a federation.


The complete essay is at Essays on Two Federal Empires.

Thursday, May 5, 2011

When the Campaign Eclipses Governing: A Matter of Values

In the mix of politics and government in any republic, stretches of governance are marked off by much shorter electoral seasons.  As decision-points, election campaigns are not designed to be of a considerable duration, particularly relative to that of governing.  In other words, the point of elections is governance, whereas the objective of governance is not (and thus should not be) elections. The reason is that the function of elected representatives is to govern rather than to run yet again. When the interstices become the long lines, and the long lines are reduced to interstices, one can expect popular fatigue from incessant fighting and frustration from a lack of attention on governing.

In April of 2011, American news networks were claiming, “2012 has officially begun.” There was a conflict of interest in the assertion because the media stood to gain viewers from brewing controversies among the candidates for president. Both the candidates and the journalists stood to gain from the increased attention.  In early May, for example, the Huffington Post attempted to turn the story of Obama’s killing of Osama into one of electoral politics in the “upcoming” 2012 election. According to the Post, “The daring nighttime raid that killed Osama bin Laden in Pakistan draws a sharp contrast between President Barack Obama and a field of potential Republican challengers who have comparatively scant foreign policy experience.” The key word here is potential. Might it be more prudent to wait for the challengers to officially announce and start actively campaigning before analysis of a “determined” set of candidates is commenced?

Moreover, the attempt to steer the foreign policy story into the field of electoral politics implicitly suffers the opportunity cost of attention being diverted from other foreign policy questions that are related to the death of bin Laden, such as whether Pakistan knew of his compound and whether U.S. foreign aid should continue. The otherwise greater intensity of coverage on Pakistan's role might have made the difference in upping the pressure to the point at which someone in Pakistan with the inside scoop would have cracked and spilled the beans on what Pakistani government officials had really known.  

                        The Huffington Post

One of the few downsides of a free society is that media distractions can run far and wide--even snowballing without taking root. To the extent that representatives are either behind such distractions or are pressured to join them, a republic is vulnerable to excessive democracy (the bad side of the demos identified by Plato and Aristotle with the mob). The American citizenry may be too prone to vicariously enjoy the fights of a campaign (the modern day version of going to the statium to watch the gladiators?) while finding the civic responsibility of keeping attuned to the governing (or at least letting the representatives govern in peace) too boring and banal--not sufficiently stimulating in an age of "reality" shows playing out on television. Must the lowest denominator rule in a republic?

As another example of campaigning eclipsing governing in the context of governance, the health-insurance reform in 2009 and 2010 can be cited. The question of whether there should be a government alternative to private health insurance companies quickly gave rise to health-insurance-company-sourced talking points on death-panels thrown to partisans like Sarah Palin, who was not involved in the governing. Also, whether Barak Obama was a socialist was staged as a sideshow oriented to the campaigning realm. For whatever reason, it was difficult for the media (and presumably the viewers) to stay on point even when policy makers were trying to determine the merits of a public option.  In other words, even having representatives oriented to policy discussions may not be sufficient to keep a restless media and citizenry attuned. However, even some of those representatives might have believed their policy positions to be strengthened from a campaign-oriented digression. In an open society, multiple entrance points exist for self-interested distractions.

To be sure, citizen participation during the intervals of governance is not necessary in a republic; the problem is when citizens’ diversions enabled by the media (and/or government officials) eventuate in the governors turning to campaigning even without an election in sight. A crucial difference between representative and direct democracy is that in a republic governance is delegated to representatives. In other words, the citizenry is not obliged to remain engaged once governance again takes over after an election. This does not mean, however, that the citizenry must take the bait when some representatives are tempted to divert from governance by starting the next election cycle too early. Nor does it mean that elected representatives must take the bait from some journalists who suspect a wider viewership (or readership) could be obtained from stirring up campaign controversies even years before the next election.

Perhaps the underlying question is whether a representative democracy necessarily succumbs to the lowest common denominator, or whether a citizenry has the requisite impulse control to maintain the viability of the political system by refusing to distract the governors from their governing (or to take the bait from bored or campaign-oriented officials). It is essentially a matter of what the citizenry values: the duration wherein representatives govern or the titillating excitement of a childish fight at the expense of governing. The funny thing about a republic is that what we observe in our representatives can be a reflection of ourselves.  We blame them exclusively at our own folly. In other words, it takes two to tangle. If there is an adult in the house, perhaps we could get on with governing.

Click to add a question or comment on campaigning and governing.
Sources:

Charles Babington, “GOP Presidential Field For 2012 Maintains Foreign Policy Void,” The Huffington Post, May 5, 2011.

Jeff Zelleny, “Obama Will Move Political Operations to Chicago,” The New York Times, January 20, 2011.

Wednesday, May 4, 2011

The Speaker of the House: A Matter of Self-Discipline in Leading

In the wake of President Obama's mission to execute Osama bin Laden, Speaker Boehner issued a statement complimenting his rival in the White House. In contrast, Sarah Palin gave George W. Bush all the credit. The Speaker, too, could have gone with political expediency. Therefore, for the Speaker to have publically acknowledged Obama's victory as America's involved political self-discipline. Speaker Boehner had sought to apply self-discipline, moreover, to his decentralized leadership style from the moment of his swearing in. Given the consolidating nature of power, such a leadership style in the House would face considerable head winds.


On January 5, 2011, John Boehner was sworn in as Speaker of the U.S. House of Representatives. He had promised to decentralize the power that had been so tightly held by the previous Speaker and others further back.  Indeed, it had been Gingrich's micromanaging of Boehner in 1995 that may well have prompted Boehner to want to give more power to lower-level party leaders and committee chairs. Boehner even promised to better provide for the minority party in that proceedings would be more open and fair.  Of course, obstructionism, favoritism, and in general the realities of governing may force the Speaker to consolidate power. The exigencies of his position may well trump any bad memories of having been one of the low men on the totem pole.  It is in the nature of human nature to identify with the present at the expense of the past. Adding to these factors, consolidating power into a few select hands may seem necessary to getting the trains to run on time.

Indeed, Boehner might be tempted to add trains. Noting the inherent difficulty in having one legislature governing an empire-scale union, the anti-federalist (and pro-commerce) Agrippa of Massachusetts wrote in 1787, "A diversity of produce, wants and interests, produces commerce, and commerce, where there is a common, equal and moderate authority to preside, produces friendship." (Agrippa, Letter 8, 4.6.30). Agrippa was bemoaning the consolidation that he feared would ensue from the powers granted by the U.S. Constitution to Congress (at the expense of the state governments). Agrippa was by in large right. The dual-sovereignty in American federalism has largely been eclipsed by decades of encroachments by the general government. It would have taken self-discipline for Congress not to have encroached when it could. Similarly, self-discipline is required for a Speaker of the House, which is a constitutional office, to preside, which is to say, to look to the overall interest of the whole rather than to engage in partisanship.  
                                                  
In spite of his asseverations to return some power to the states and to decentralize his power in the House, Speaker Boehner is apt to reverse himself in practice. Should he do so, he might find that his tenure is shorter rather than longer, for those who clutch most to power tend to see it slip through their hands faster than otherwise. Despite pushing through a lot of big legislation, both Speakers Gingrich and Pelosi lost their Speakerships relatively quickly. The nature of power may well be paradoxical: those who love it most may well be least equipped to manage it.


Sources: Naftali Bendavid and Patrick O'Conner, "New Speaker Vows to Share Power--a Tricky Proposition," The Wall Street Journal, January 4, 2011, pp. A1, A6.

Agrippa, in Herbert J. Storing, ed., The Anti-Federalist, Chicago: University of Chicago Press, 1985, p. 243

President Medvodev Presiding in Russia: The Case of a Separate Judiciary

On December 31, 2010, a Russian judge sentenced Mikhail Khodorkovsky, the Russian tycoon who had been imprisoned in 2003 after defying Vladimir Putin, to an additional six years in prison. According to The New York Times, "It was a politically tinged decision that undermined President Dmitri Medvodev." Leonid Goman of the Right Cause Party in Russia agrees. "It was obviously a political, not a judicial, decision." In general terms, "corruption is endemic, government power is often abused and senior politicians are rarely, if ever, held accountable for misdeeds."  The sentence is an indication that Prime Minister Putin was still in control of Russia.  His message was that wealthy businessmen should not interfere in Russian politics.  Khodorkovsky had financed opposition political parties. He was at one time the richest person in Russia, having been one of the oligarchs who bought government assets at bargain prices after the fall of the USSR.

Analysis:

This case illustrates how personal or partisan agendas can compromise a president’s credibility. That is, that President Medvodev was thought by some to be undermined implies that his office is inherently above partisanship.  If the prime minister was indeed running the show, that partisan office had eclipsed the presiding function of the presidency.

This case also points to the importance of separating a judiciary from executive and legislative branches of government. The fragile nature of a judiciary's credibility is also in the mix, as it was undoubtedly diminished by the sentence. While doing the bidding of a powerful government offiical may well be in the short term interest of a judge, such a practice contributes to the downfall of a country's judiciary. The president of a country is charged with presiding over its system of government to protect it as a going concern.  Matters such as the credibility of an entire branch of government ought thus to be on a president's radar screen. 

In the case of Russia, the problem was that the Prime Minister may have been running the show and tacitly undermining the president by expediently abusing the judiciary while keeping the president from acting to safeguard the long term viability of the government. Politics over leadership means short-term over long-term. All too often in many countries, presidents do not attend to the overall viability of their systems of government, preferring instead to engage in partisan politics. The Russian case illustrates the cost.


Source: Clifford Levy, "Russia Extends Prison Sentence of Tycoon 6 Years,” The New York Times, December 31, 2010, p. A1.

See related essay: On the Eclipse of Russian Federalism: Implications for the E.U.

Tuesday, May 3, 2011

American Foreign Policy on Pakistan: Balancing Foreign Aid and Duplicity

Osama bin Laden “lived and died in a massive, fortified compound built in 2005 and located on the outskirts of Abbottabad, some 60 miles from the capital of Islamabad. It stood just a half-mile from the Kakul Military Academy . . . and close to various army regiments. . . . (C)ongressional Republicans and Democrats questioned whether bin Laden was hiding in plain sight, with Pakistani military and intelligence operatives either totally unaware of his location or willfully ignoring his presence to protect him.

                                                              Reuters
‘I think this tells us once again that, unfortunately, Pakistan at times is playing a double game,’ said [U.S.] Sen. Susan Collins, R-Maine, a Senate Armed Services Committee member who indicated that Congress could put limits on funds for Pakistan. ‘It is very difficult for me to understand how this huge compound could be built in a city just an hour north of the capital of Pakistan, in a city that contained military installations, including the Pakistani military academy, and that it did not arouse tremendous suspicions.’ Based on the location of the compound and its proximity to army regiments, Senate Armed Services Committee Chairman Carl Levin, D-Mich., said Pakistan's intelligence service and army has ‘got a lot of explaining to do.’

What [Pakistani] state officials and those in the military may have known about bin Laden could be quite different from what tribes and even families in the region knew or, more to the point, were willing to say about the Abbottabad compound and its occupants. Prior to the raid on the compound, U.S. officials say, they didn't inform Pakistan of its plans. Unaware and unnerved Pakistanis scrambled their aircraft in the wake of the U.S. military intervention. Pakistani authorities expressed ‘deep concerns’ that the operation was carried out without informing it in advance.” In fact, former Pakistani prime minister (and general) Musharraf claimed that the raid violated Pakistan’s sovereignty.

Analysis:

Both Collins and Levin are highly credible U.S. Senators. Carl Levin chaired the Senate hearings on Goldman Sachs in 2010. He charged the bankers with knowingly selling their own clients on housing-backed securities (CDOs) that the bankers knew were “crap.” The other indicator I would point to is the fact that the Pakistanis were not told in advance of the successful mission. At the very least, this indicates a lack of trust, which presumably does not come out of thin air. I would not be surprised if there had been leads subsequently leaked. Most probably, certain elements in the Pakistani government allied with particular tribes had provided intel on a case by case basis to the terrorist network. Even so, that bin Laden was in such close proximity to the Pakistani military since 2005 is indeed suspicious; that the U.S. Government had given Pakistan $18 billion since 9/11 turns out in hindsight to be problematic and perhaps even embarrassing.

Given her reasonable suspicion of betrayal, Sen. Collins’ suggestion that the foreign aid be “limited” does not go far enough. In fact, it sounds like a lawyerly “solution.” Even though just a week before the death of bin Laden, Pakistan’s ruler tried to get Karzai in Afghanistan to drop the U.S. in favor of Pakistan and China, it is not in the interest of the American government to continue to give billions to a government that could not be trusted even for the top U.S. priority. In other words, if Pakistan could not be trusted on something so important even with the foreign aid, why continue to give more?

Moreover, giving foreign aid to dictatorships or fraudulent “democracies” undercuts the American goal of a world consisting of republics. Ironically, trying to extend one’s influence beyond the extant republics in the world can actually fortify resistance that which the influence is geared to achieve. It is naïve to think that simply giving dollars to a dictator or corrupt ruler will somehow edge him or her closer to democracy. In actuality, the dollars make the shift less likely because the dictator or corrupt “elected” ruler is strengthened by the aid.

So if Karzai in Afghanistan wants to continue to use elections as window-dressing and Pakistan wants to continue to allow elements to play one side against the other involving the U.S., I contend that it is in the American interest (beyond immediate influence) to cut off the American funds. Given the value on wealth in the U.S., the American government may tend to overstate the ability of dollars to manipulate foreign governments beyond mere lip-service as a front to duplicity. At the Center for Global Development, according to Marketplace, Nancy Birdsall pointed out that aid "does not buy love; it does not even provide leverage, frankly." Getting only what we want to hear is perhaps fitting if we are so oriented to manipulating others for immediate effect rather than to rewarding only true friends. Would this alternative really be such a dramatic or radical shift in policy, or do we give the status quo too much weight?

Regarding Musharrif’s claim that Pakistan’s sovereignty was violated by the U.S. mission, the former prime minister was conveniently overlooking the trust issue, and thus the real probability that secrecy was necessary for the success of the mission due to Pakistan’s track record. He was also ignoring the argument that given Osama bin Laden’s extent of harm in the U.S. and the fact that the terrorist had indeed been living in Pakistan (i.e., that government had at the very least failed to apprehend him), the American government—having essentially declared war on bin Laden’s organization—had the military right to go in and take out the man. In short, it is very convenient for Pakistani officials to ignore their own state’s faults (or failure to contain leaks and, moreover, to have caught bin Laden) and blame the American government for obviating those faults. At the very least, it is bad form. Whether the American government is willing to act on this intel beyond extending a mere slap on the wrist remains to be seen.

Please click to add a question or comment on Pakistan and bin Laden, and U.S. foreign aid.

Sources:

Pakistan Accused of Playing bin Laden ‘double game’” MSNBC.com.

John Dimsdale, "Sights Set on U.S. Aid to Pakistan," Marketplace, May 2, 2011.

Osama Killed by Obama: What Does American Patriotism Stand For?

On the day after Osama was killed by Obama, people in the American states were united in a feeling of pride for their union. Midway through a run at sunset, I paused beneath an American flag. I was caught not out of breath but by the distinct snapping sound of lazy flapping noises as the flag rolled in the light breeze. I looked up and stared at the red, white and blue performing its series of rolls. The fabric was much more alive than that stiff, wired flag still on the surface of the moon. A flag is meant to be alive—literally carried along as troops advance on a battlefield. Today’s flags hanging off still poles next to restaurants and car dealerships can hardly capture the dynamic energy of victory. To be sure, such victory was hinted at the night before as people ran hither and dither carrying flags in celebration outside the White House. It had struck me in watching the joyous scene how rare such clear-cut victories are.  It is a pity that some enemy must die for such clarity to be celebrated in a spirit of unity.

Looking up at sunset at the American flag—a symbol that has seemingly always been around—I wondered what it really stands for. What values cling most firmly to it?—nevermind the principles that are formally entailed in it. Turning to look at the auto business sponsoring the flag, I noticed a large sign displayed high up across one of the building’s walls above the repair garage: “Free Courtesy Cars for Customers with Select Insurance Companies.” My mind instantly leapt to “Free health-care for citizens with select health insurance only”—the others don’t get any. Is monetary-based exclusion the American way? What does that flag say about those who are not among the select? Is the red, white and blue referring to people living here who have money—the others just sort of existing here as though permanent aliens?

As my eyes were about to go back up the flag pole, I noticed that between tree trunks the naked sun was just about to touch the ground. Heaven would meet earth for a split-second before the ground ate into the perfect circle. I thought of Ben Franklin’s comment at the end of the U.S. constitutional convention in 1787 as he was wondering aloud whether the sun painted on the back of the presider’s chair was rising or setting. It would be ironic if on the day after a great military victory I associated the setting orange disc with the bright colors waving above me; something about the “select insurance companies” wording on the wall of the sponsoring company was giving me a proclivity to do just that, even as I felt a sense of pride in my eyes being drawn to the power in the movements of the giant fabric above me.

After my run, I briefly spoke with an auto-plant worker visiting from Michigan. He had been watching the Detroit Tigers play the Yankees.  He was disappointed in his team because even with a $200 million payroll, they had lost to Minnesota (I think). Of course, the Yankee organization knew how to put out the money to buy talent. The Tiger fan put it more bluntly. “The Yankees buy championships.” For a fan to reduce baseball teams to their payrolls seemed odd to me. Do fans in other regions of the world reduce sport to money, or is there something distinctly American about it? Whereas in Europe player captains receive championship trophies, team owners tend to get the honor in America. Clearly, a subtle difference in the value of wealth (and money as a motivator) distinguishes the United States from the European Union. Might wealth itself be what America is known for as a society?—a people obsessed with valuing money?

Can we go so far, moreover, as to conclude that the American flag stands for money? If so, did the patriotism evinced in the wake of Osama’s death reduce to dollars and cents? The political uncertainty that comes with terrorism is unquestionably bad for business. Even so, the sense of justice achieved through the execution—we could not even risk a trial—stood on the principle of an eye for an eye. Money, it could be said, was put in the service of a normative debt to be paid for the loss of innocent lives even though they could never be retrieved. However, it is difficult to see how the patriotism evinced reduces to greed.

So what does the American flag really exude? Patriotic confidence? An in-crowd based on wealth? Perhaps some other set of values that can only be observed from a distance? What does the diverse empire of fifty republics united in an extended republic stand for? Is there a common denominator or is the patriotism of victory an artificial construction based on convenience?  I suspect that these questions will go unanswered until or unless Americans are called on to sacrifice, for it may be that the value of self-denial is too far removed from what the flag has come to represent.

Monday, May 2, 2011

On the "Wedding of the Century": History Made or Manufactured?

In hyping the royal wedding of William and Kate in the E.U. state of Britain, the media even in other E.U. states applied the title, “The Wedding of the Century” in spite of the fact that the century was only in the second year of the second decade. It is rather presumptuous for people alive at such a time to claim so much for their time, and therefore for themselves. Lest our self-constructed bubble unexpectedly bursts, we might let some air out of our self-constructed balloon in a controlled manner such that our bloated egos can survive without too much bruising.

                                            From Star magazine

It is interesting how those of us who were adults in the last decade of the 20th century did not look back to any such weddings around 1911 that might have been labeled then as "the wedding of the century."  I do not even know if there were any such royal weddings back then that might qualify. Having seen the film, “The King’s Speech” a decade into the twenty-first century, I came to know a bit about the British royals of the late 1930s, but even then I could only draw a blank from Queen Victoria to the abdication made out of love. Even in terms of American rather than European history, the twentieth century begins for me at the end of World War I and takes off with the roaring twenties—that opening act ending with the ensuing economic drama in 1929. 

From the standpoint of 2011, it seems a tad bit early for us to be labeling anything in our time as definitive for the upcoming century.  From the standpoint of people who will be adults in the 2090s, people like me are like the people who were born around the time of (or just after) the war between the USA and CSA (wrongly called a civil war as the CSA was a separate country rather than a faction contending to take over the USA) and died of old age during the 1930s or at the time of WWII. Such people were practically forgotten to the people who were adults in the (American) States during the 1990s. That is to say, we who vaunt our events “of the century” will barely register to those people who will be in a position to look back on the century.  I suspect that they will look back to the people who will have been in their prime during the 2050s thru the 2070s.  

Those people who celebrate the coming of the next century will look back to celebrities similar to how I looked as far back as to Fred Astaire and Cary Grant. Even the jazz singer whose mami pierced the silent screen in 1929 is barely on my radar screen—as if the coming of sound in moving pictures was merely the start of the century (as though the previous three decades were projected silently on a blank screen).  

 I do not know much at all about the days of Grover Cleveland and Teddy Roosevelt--that is, before World War I. Similarly, adults alive in 2095 may barely know who George W. Bush and Barak Obama were and yet our world (at least in the U.S.) is dominated by discussion about those presidents.  

In the first few years of the second decade of the twentieth century, the U.S. Supreme Court declared the Standard Oil Trust to be unconstitutional--being in restraint of trade. At the end of the 1990s, the Glass-Steagal act separating investment and commercial banking was repealed without any hint of the progressive movement that had given rise to the Sherman Anti-trust Act. Corporations had long since won the day.

In 1913, U.S. constitutional amendments were ratified changing how U.S. Senators were to be chosen (state governments no longer being directly in the U.S. Government) and expanding how the U.S. Government could tax its citizens (at the expense of state taxes). By the end of that century, American federalism was nearly invisible—Washington D.C. having become the focal object in terms of policy.

In 1914, World War I began in Europe. In 2011, the last remaining American veteran of that war died. Memories of that war had long since faded—the Austrian-Hungarian Empire having been replaced by the Nazis and Japanese in the world’s collective consciousness.  I suspect that in 2095, 9/11 as “permanently etched in our memory” will no longer be so, just as December 7th had faded from "living in infamy" by 1995. Pearl Harbor was certainly eclipsed by 9/11. In 2011, Pearl Harbor is all but forgotten as Americans feel profound sympathy for the Japanese suffering in the wake of the 9.0 earthquake and tsunami and cheer the death of Osama as justice.

From the standpoint my desk in 2011, I look out onto a vast field of time that is as of yet unknown and utterly undeveloped. I cannot even imagine what will go down in the 2030s or 2040s. That people not yet born and thus yet to be married will look back on that now-empty field as crowded gives me great pause as to the significance of my time and what claims I can properly make concerning events today. In a way, I feel like I am living in a time before time—before memories yet to be remembered even in the same century.

Click to add a question or comment on the significance of the royal wedding or on this time more generally.

See related essay: "On the 'Wedding of the Century': Royalty as Natural or Exaggerated?"

Leadership at Lehman: On the Failure of Richard Fuld

The failure of Lehman Brother suggests that too much power may go with formal position while non-positional leadership in organizations is not given enough of a chance to check the excesses of office. Richard Fuld could take advantage of much having to do with his formal position so he would not have to lead. In contrast, a competent subordinate, Mike Gelband, faced a considerable headwind in trying to lead through persuasion without the benefit of a position trumping Fuld’s own.



The full essay is in Essays on the Financial Crisis, which is available in print and as an ebook at Amazon.