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Saturday, December 29, 2012

Mario Monti: Succumbing to Power?

He was supposed to have been reluctantly pushed into briefly stepping in as prime minister in Italy to push austerity measures through the state legislature.  According to Deutche Welle, “The 69-year-old former European Commissioner was appointed to lead Italy’s government . . . to restore Italy’s finances following Berlusconi’s departure.” The technocrat was not supposed to so interested in power that he would want to stay on. At the end of December 2012, Mario Monti announced that he would lead a centrist group of politicians against the Democratic Party and Berlusconi’s People of Freedom party in the upcoming election.  Had the former bureaucrat “found religion” in some political cause, or had he developed a taste for power? If the latter, we might ascribe the motive to the human propensity to resist giving up power willingly.
  Mario Monti at the European Commission. A launching point for Italian politics?    (source: nytimes.com)
The full essay is at Essays on the E.U. Political Economy, which is available at Amazon.

Friday, December 28, 2012

Averting the "Fiscal Cliff": A Solution Overlooked

With just days to avert the beginning of automatic, across-the-board cuts in the U.S. federal budget and the end of the Bush tax cuts and payroll tax reductions, President Obama met with Congressional leaders at the White House following a brief respite over Christmas. The discussion was doubtless on what could pass Congress in time. The U.S. Secretary of the Treasury was also attending, so the upcoming debt-limit could also have been part of the discussion. It could be argued that the perspective itself at the meeting must have been too narrow—too small—even though the crisis demanded leadership.
The complete essay is at Essays on Two Federal Empires, which is available at Amazon. 


José Manuel Barroso: Picking Romania’s Government?

On December 9, 2012, Romanian voters approved of the coalition of the then-current Prime Minister Victor Ponta, by a two-thirds majority. However, because Ponta had been in a bitter political feud with President Traian Basescu—Ponta’s coalition tried and failed to impeach the president—it was not clear that the president would nominate Ponta for prime minister even though that post must be approved by the parliament. Basescu did wind up nominating Ponta. The interesting point here is that President Barroso of the European Commission publicly waded into the choice on behalf of Ponta. 
 Prime Minister Ponta of Romania: Propped up by Barroso?           exclusivnews.ro


The full essay is at Essays on the E.U. Political Economy, which is available at Amazon in print and as an ebook.

Thursday, December 27, 2012

Pot in Colorado: Getting High on American Federalism

On November 6, 2012, Colorado’s citizens approved with a 55% majority a marijuana-legalization measure that allows residents over the age of 21 to possess up to an ounce. The measure also allows for the commercial growing and selling of pot. More than a month later, the government of Douglas county in Colorado passed a law prohibiting companies from growing or selling cannabis. Meanwhile, the U.S. law continued to make the growth, sale, possession or use of pot illegal. Over all, it would seem to be a case of federalism as a pretzel of sorts, all twisted up into itself. This case study can be used to point to a more perfect union in terms of federalism.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Thursday, December 20, 2012

Is a Stronger E.U. in America’s Interest?

Is a stronger E.U. necessarily in the interest of the U.S.? According to Ed West of the Telegraph, “it’s not clear whether a united Europe would necessarily be more pro-American, automatically siding with the US against the rest. European countries have their own interests with regards the Middle East, Africa and China, which often don’t coincide with America’s, and on a range of world issues European public opinion is fairly hostile to America, decades of American military protection having inspired not gratitude, but resentment. Britain is something of an anomaly in Europe, popular opinion being unusually hostile to the EU and warm to America.” This passage can be taken to task on at least two points.

The complete essay is at Essays on Two Federal Empires, which is available at Amazon.

Thursday, December 13, 2012

A British Referendum on the E.U.

Legislators can make the task of getting instructions from the popular sovereign, the people, unduly difficult. In November 2012, the Florida legislature confronted its people with several proposed constitutional amendments written in legalese that even some lawyers found difficult to navigate through. The next month, Boris Johnson and Liam Fox of Britain pressured their state’s legislature to put forth a referendum that, unlike that of Florida, would present the people with a clear choice.

The flags of Florida and the United Kingdom. 
   
The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Wednesday, December 12, 2012

How to Beat the Rap, HSBC Style

In HSBC’s settlement with the U.S. Government, the bank has to pay $1.9 billion—about half a quarter’s profit—but avoids criminal charges. The New York Times quotes government officials who said they were hesitant to indict the bank because formal charges could mean bankruptcy, which in turn could roil the financial system itself owing to the bank being too big to fail. That is to say, one of the advantages of being TBTF is apparently that of effective immunity from criminal charges.
 The full essay is in Cases of Unethical Business, which is available at Amazon.

Tuesday, December 4, 2012

SEC Goes After Chinese CPA Firms: Beyond Diplomacy

The Securities and Exchange Commission brought an administrative proceeding against the Chinese affiliates of five major CPA firms, including the “Big Four,” in 2012. Chinese companies had raised billions of dollars on American (and Canadian) exchanges only for the share prices of the companies to plummet due to questions about bookkeeping and disclosures. The SEC alleged that the CPA firms in China refused to hand over documents in connection with the investigation of alleged accounting frauds at nine Chinese companies. The SEC maintained that firms that audit U.S.-traded companies must follow U.S. law, and the Sarbanes-Oxley Act requires foreign audit firms to hand over documents about U.S.-listed clients at the SEC’s request. SEC Commissioner Luis Aguilar said that the investigations “have been hampered by the lack of access to relevant documents.” For their part, the CPA firms in China (affiliates of American-based CPA firms) pointed out that their audit papers are treated like state secrets in mercantilist China, and that the auditors could therefore be imprisoned for handing the material over a foreign government without permission from the Chinese state. 

The full essay is in Cases of Unethical Business, available at Amazon.com.  

Bailouts Without Stimulus: E.U. Policy on Spanish Banks

Directly and indirectly, the housing bust that began in 2007 put “the bailout” on the map in the lexicon of industrial policy both in Europe and North America. Whereas in the U.S., few restrictions were placed on the recipients, the E.U.’s first €37 billion ($47.9 billion) for Spain’s banking sector required the four major state banks “to make sharp cuts in their balance sheets and payrolls,” according to the Wall Street Journal. Bankia, the largest of the banks to be bailed out, planned to cut its number of employees by more than 6,000, close more than 1,000 branches, pass on any further real-estate lending, and reduce its assets by €50 billion as the bank focuses on retail banking—getting back to the knitting, as it were. Presumably the bankers were not allowed to grant themselves bonuses as a condition of the bailout. If so, it would differ appreciably from the U.S. bailout of Wall Street banks.

The full essay is at Essays on the E.U. Political Economy, available at Amazon.

Saturday, December 1, 2012

Bad PR and Bad Banking: BOA

How to do bad PR: Announce plans to raise fees effecting low-income customers, then pull back, wait a year, then announce such plans again, then pull back yet again. This sort of PR strategy gives rise to headlines such as, “Bank of America Backs Down on New Fees.” The Wall Street Journal could have added, “yet again.” Besides the obvious PR downside to announcing unpopular fees—and on one’s least well-off customers—is the implication of weakness or vulnerability in repeatedly backing down. In the animal kingdom, Bank of America would not exactly be the alpha male lion. Rather, the bank would be one of the other males, which may or may not get to reproduce.
                                          
The full essay is in Cases of Unethical Business, available at Amazon.com.  

Monday, November 26, 2012

The Filibuster: States' Rights or a Partisan Ploy?

Before 1917, senators could filibuster only by talking continuously on the U.S. Senate floor. There was no mechanism to stop them. Such filibusters were rare until entering World War I was debated. In 1917, the Senate passed its first “cloture” rule, whereby two-thirds of the Senate could cut off debate and force a final vote. Between that year and 1971, no two-year session of Congress had more than 10 such votes. Even so, in 1971 the rules were changed to allow other legislation to be taken up during a filibuster—relieving a senator of having to continuously talk to maintain one. Making it easier to filibuster quickly led to the predictable result of more filibusters. In the 93rd Congress (1973-74), the number of cloture motions jumped to 31, from an average in the 1917-1971 period of two per Congressional session. In 1975, the number of votes needed to stop a filibuster was lowered from 67 to 60. However, this change did not curtail the use of the device, as it is rare for a party to control 60 votes out of 100 in the U.S. Senate. By 2010, the average number of cloture motions per two-year session had risen to 129, which suggests that the filibuster had become more typical in how senate business was to be conducted. In effect, legislation and even executive business, such as confirming presidential nominations, needed a supermajority (60 out of 100) in the upper chamber of Congress.


The complete essay is at Essays on Two Federal Empires, available at Amazon.


Non-Tariff Barriers to Trans-Atlantic Trade

Karel De Gucht, the E.U. trade commissioner, said in late November 2012, “There is now, for the first time in years, a serious drive towards an E.U.-U.S. free-trade agreement.” The office of his counterpart, Ron Kirk, the U.S. trade representative, indicated that a high-level working-group consisting of Europeans and Americans was working on “how best to increase U.S.-E.U. trade and investment.” The sticking point concerned non-tariff barriers, such as different regulatory standards.

The complete essay is at Essays on Two Federal Empires, available at Amazon.
Karel De Gucht, the E.U. Trade Commissioner, advocating a free-trade pact with the U.S.  (Reuters).

Sunday, November 25, 2012

Steve Jobs: The Sad Truth about Visionary Leadership

According to Joe Nocera, Steve Jobs was not a consensus-builder but a dictator. Lest it be objected that this disqualifies him from being admitted to the “true leader” hall of fame, Nocera hints at an explanation for why visionary leaders may not be all that touchy-feely after all. Nocera suggests that Jobs was a dictator because he “listened mainly to his own intuition.” He “never stopped relying on his singular instincts in making decisions” on Apple products. This makes complete sense, as his sense was singular. 
Steve Jobs at Apple. Is it the vision or charisma that accounts for the focus on such pictures?   Getty

Friday, November 23, 2012

Mexico’s Name-Change: A United States No Longer?

Shortly before leaving office, Mexican President Felipe Canderón sent to the Mexican legislature a proposal to amend the state’s constitution by renaming the country “Mexico,” from the “United Mexican States.” His rationale was that Mexico didn’t need “a name that emulates another country and which none of us Mexicans uses on a day-to-day basis.” Indeed, the emulation evinces a category mistake in that it treats what was province in an empire, that of New Spain, as an empire.
                                   Mexico's head of state, Felipe Calderon, who proposed the name-change.  
The full essay is at Essays on Two Federal Empires, available at Amazon.

Thursday, November 22, 2012

Moody’s: Statist France Lagging in the E.U.

Bashing the French in a major article on their lack of business competitiveness, the Economist was the target of la colère en Paris in November 2012. Just after the magazine’s warning that France could be the next danger-zone for the euro due to relatively high labor costs and unemployment, Moody’s cut the state’s rating to Aa1 from Aaa and kept a negative outlook on the rating. Moody’s cited the state’s economic weakness and the risks to the finances of the state government “posed by” France’s “persistent structural economic challenges.” In this way, Moody’s analysis dovetails with that of the Economist. Both pointed to a sort of impotence in French industrial policy. Moody’s decision excluded factors from the broader debt crisis in the E.U., focusing instead on the French government’s continued “reliance on borrowing to finance generous social-welfare programs” even as businesses in the state were laying-off employees. In other words, Francois Hollande had not gone far enough in his policies to make a dent in the state’s deficit as well as the downward trajectory of French competitiveness in the E.U. Meanwhile, deteriorating economic conditions in the E.U. were effectively closing the window of opportunity on even a one-party government being able to enact substantive reform. I contend that the gap between what the Socialist party could do, given its absolute majority in the legislature, and what it was actually doing contributed to the criticism.

Changes in real GDP in the state of France. A general downward trend-line is apparent.     
Source: World Bank

The full essay is in Essays on the E.U. Political Economy, available at Amazon. 

Wednesday, November 21, 2012

House of Commons Undercuts Cameron on E.U. Budget

In 2012, David Cameron of Britain “suffered his first major House of Commons defeat” in governing  “when some in his party failed to back his position on the budget negotiations and urged him to secure deeper cuts” in the pending 1 trillion euros E.U. budget for 2014-2020.  Although Cameron had stated he would veto the European Commission’s proposal to increase the overall E.U. budget by 5% annually for the seven-year period, he did not support cutting the federal budget. Because the vote in his state legislature for cuts in the federal budget was non-binding, the governor was free to ignore it in the European Council, where the state governments are represented. The European system of public governance suffered from at least two major weaknesses here.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

 David Cameron representing his state at the E.U.  (AFP/Getty)

Tuesday, November 20, 2012

States Pull Ahead of E.U. on Syria: A Compromised Foreign Policy?


In November 2012, the New York Times reported that the European Union was offering “crucial support for the new Syrian political opposition,” which the E.U. referred to as the “legitimate representative for the Syrian people.” The E.U. stopped short of “conferring full diplomatic recognition” to the new group—the National Coalition of Syrian Revolutionary and Opposition Forces—even though one of the E.U.’s states, France, had conferred such recognition one week earlier, and another state, Britain, would soon do likewise.

The full essay is at Essays on the E.U. Political Economy, available at Amazon.

Thursday, November 15, 2012

The U.S. Producing More Oil: A Panacea or Obstacle?

The International Energy Agency projected in 2012 that a shale-oil boom would catapult the United States over the state of Saudi Arabia as the world’s largest oil producer by 2020. In the words of the Wall Street Journal, the global energy map was “being redrawn by the resurgence in oil and gas production in the United States.” Although the United States would benefit in the period from the trajectory, the drawbacks should not be ignored. In fact, the trend could be harmful in the long term if preparedness for a world without oil is put off as a consequence.

The entire essay is at "The U.S. Producing More Oil."

Tuesday, November 13, 2012

Women on Corporate Boards: Britain vs. the E.U. Justice Commissioner


In 2012, women made up 13.7% of board positions in large listed companies in the E.U., and 15% for nonexecutive board positions, according to The Wall Street Journal. In the U.S., according to Kay Koplovitz of USA Network, the number of women on corporate boards had been stalled at more or less 15 percent for over ten years. Whereas in the U.S., people would look at Congress to enact a uniform inter-state standard or else leave the matter to individual corporations, the E.U. has other alternative means, such as the directive. That device relies on the state governments to decide on the penalties as well as enforcement against violators of the E.U. law. Even though the Commission could take a state refusing to implement a directive to the European Court of Justice, the “cost” of the flexibility in the state-based implementation is a possible dilution in the law’s aims being achieved throughout the E.U. rather than just in a few states. Put another way, even as the ideological diversity within the empire-scale union is accommodated, advocates of more female representation on corporate boards may be disappointed as some states give non-complying companies only a slap on the wrist.


The full essay is at Essays on the E.U. Political Economy, available at Amazon.

Thursday, November 8, 2012

Divergent Fiscal Policies in the E.U.

States on divergent fiscal paths can test the flexibility of an empire-scale union, particularly if it is relatively new and still developing. Simply having different industrial/agricultural make-ups can put states at odds with each other. That the richer states can use fiscal policy to become even richer, while the policies imposed on poorer states may aggravate their fiscal conditions, can mean that the economic distinctions between states can become an increasing problem in a federal system, even given the allowances enabled by federalism itself (e.g., by the principle of subsidiarity). 


The complete essay is at Essays on Two Federal Empires, available at Amazon.

Monday, November 5, 2012

Romania’s Monetary Policy in Federal Europe

Sometimes monetary policy and federalism can interact in interesting ways. To grasp a particular relation, such as that of Romania in the European Union, it is first necessary to keep in mind that monetary policy is not federalism and vice versa. An anti-federalist, for example, might have an incentive to conflate the two concepts out of a desire to deny the existence of a federal system already underway.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

      Romanian currency.     Source: banknotes.com

Friday, November 2, 2012

E.U. Directives: Applicability to American Federalism

Far from having gone off the court to an easy retirement in the Bahamas, U.S. Supreme Court justice John Paul Stevens found a calling in advocating the addition of four words to the U.S. constitution, here put in italics: “The laws of the United States . . . shall be the supreme law of the land; and the judges and other public officials in every state shall be bound thereby.” While the proposal seems innocent enough, and even a matter of progress after the fashion of the E.U. Stevens’ rationale befits the more general shift at the time from federalism to consolidation in American governance.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Monday, October 29, 2012

Wiley Punishing Resellers: Beyond Profits

Publishers sell English-language textbooks at lower rates in developing countries. Such “cut-rate foreign goods” are a staple on e-Bay. In late October 2012, the U.S. Supreme Court heard arguments on a case that pits the practice against the claims of publishers of copyright infringement. The case began when Wiley accused a USC doctoral student of copyright infringement and won a $600,000 judgment. The student not being able to afford the judgment, Wiley successfully urged the judge to take the student’s golf clubs and his computer after his graduation—as if sending the student to his room without dinner even though the vase is still broken. Clearly, the clubs and computer could not come even close to covering the judgment. Given the lack of publicity on the particulars, I doubt that the terms were even designed to be a deterrent. If I am correct, the motive comes from more of a “stick it to him” mentality. Whereas a legal analysis of the case is doubtless most typical, I want to try to uncover the sordid nature of this mentality behind the “clubs and computer” slap-down.

The full essay has been incorporated into On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available at Amazon.

German Conservatives Ease Up on Greece

During the summer of 2012, it was all too easy, especially for financial analysts (whose expertise is on finance rather than politics), to summarily conclude that the E.U. was not capable of keeping the states of Greece and Spain from default. Perhaps the human brain has an innate proclivity to think in bipolar terms in the sense that something (or someone) is presumed either “good” or “bad.” Empirically, social organization, which includes politics and finance, is typically more gray than “black and white.” This is undoubtedly the case concerning the political risk analysis that goes into assessments of systemic risk, especially where uncertainty is salient. In general terms, I would say that as of 2012 the anticipated demise of the euro (and even the E.U.) was much exaggerated. Somehow or other, European policy-makers were able to hold the federal ship-of-state together in spite of its vulnerabilities.

The full essay is at Essays on the E.U. Political Economy, available at Amazon.

Friday, October 26, 2012

Cameron to Van Rompuy: No Negotiation on E.U. Budget

Just days before the House of Commons debated whether Britain should secede from the E.U., Prime Minister David Cameron and his deputy, Nick Clegg, met with Herman Van Rompuy, President (or chair) of the European Council, to discuss Cameron’s threat to veto any proposed seven-year E.U. budget that is higher than the previous budget (allowing for inflation). The European Commission had proposed a 5% increase over the current budget, setting the stage for a clash of the titans across the federal and state levels. The British refusal even to negotiate on the federal budget exposed a major vulnerability in the E.U. itself just as it was being relied on internationally to protect the euro from succumbing to the systemic risk of Greece or Spain defaulting.

The complete essay is at Essays on Two Federal Empires, available at Amazon.



Anti-Federalist Britain: South Carolina on Steroids

If Douglas Carswell, a member of the House of Commons, had his way, Britain would secede from the E.U. before Prince Charles could say, “hip hip!” Carswell's Private Member's Bill, submitted for debate in late October 2012, would repeal the European Communities Act (1972), by which Britain became a state in the former European Economic Community in 1973 (after France had vetoed Britain’s first request). Although Private Member’s Bills rarely become law in Britain, merely having a debate on whether to have a referendum on the question of whether the Kingdom should secede from the empire-level union would stir the pot. The Prime Minister, who was on record in support of not pulling out of the union, but for only economic reasons as his state had been benefitting from the large common market. So even if Carswell’s effort is ultimately unsuccessful, even such a revolt by Tory back-benchers could undercut David Cameron’s power in the midst of a languid economy in the state.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

PM David Cameron of Britain at the European Council. Is he onboard?     AFP/Getty

Thursday, October 25, 2012

The U.S. Sues Bank of America: A Spanking or Slap-on-the-Wrist?

In late October 2012, federal prosecutors in New York formally accused Bank of America of “carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.” The guarantee can be considered a moral hazard, in that Bank of America (or Countrywide) was not the party on the hook. In other words, the mortgage service company had an artificial incentive to produce mortgages riskier than would otherwise be the case because they would be guaranteed by another party (i.e., American taxpayers).

The full essay is at "U.S. Government Sues Bank of America."

Wednesday, October 24, 2012

Political Risk in Systemic Risk: Finnish Pensions Err in Debt Crisis

Finland became a state in the European Union in 1995 and adopted the euro at its birth in 1999. In terms of population, the state is between Wisconsin and Minnesota, both of which are states in the United States. The Finnish culture prizes saving as well as paying-off debt on time. As the Wall Street Journal put it, the Finns are more German in this sense than are the Germans themselves. It is easy to understand, therefore, why the Finns would not have been excited about the write-offs in Greek government in 2012. The Finnish cultural attribute here is an ideological proclivity. Such a value-system so deeply held can even eclipse or interfere with an otherwise unfettered risk-return trade-off presumed to be part of the market mechanism. Just as the risk-return investment-pricing froze rather than adjusted upward with the leap in risk in CDOs and the related insurance swaps that occurred on Wall Street in 2007 and 2008, the decisions of Finnish pension fund officers in the wake of the European debt crisis to pull out of Greek and Spanish bonds rather than simply to demand a higher rate of return, given the higher risk, likely means that the market mechanism itself freezes rather than functions at levels of high risk (or when risk is increasing dramatically). In other words, the theory of the laissez-faire market, which Adam Smith never advocated, has a serious flaw that is reflected in the mechanism in operation when there is a spike in risk. Un prix ne marche pas quand il y a beaucoup du risque. The free market mechanism in the investment market tends to freeze up rather than re-price instruments whose risk is quickly increasing to a significant degree.


The full essay is in Essays on the E.U. Political Economy, available at Amazon. 

Monday, October 22, 2012

Predicting Future Events in Political Risk Analysis: On the European Debt Crisis

Political risk assessment is a nasty business in that the future has a stubborn habit of not wanting to be too predictable. Even though tomorrow displays a remarkable tendency to be similar to the world of today—the status quo enjoying the right of default—forecasting future events is notoriously difficult. To use statistics to nail down probabilities may actually involve considerable luck. Not even the stature of the person making the predictions may be decisive, after all. I have in mind the predictions of Alexei Kudrin, the former Russian finance minister, on the European debt crisis and the euro.

                                                             
The full essay is in Essays on the E.U. Political Economy, available at Amazon.

Friday, October 19, 2012

Euroskeptic Spoilers in the Council: Two-Tracks as a Solution

During its meeting in October 2012, the European Council decided to move forward on the legal underpinnings of a banking supervisor at the ECB. The position was officially accepted at the next meeting in December. The position was designed to be responsible for overseeing the banks in the states that use the euro. Some of the debate between state leaders at the October meeting involved when the supervisor would be up and running. The issue of timing was particularly relevant and indeed pressing at the time because federal bailout money would flow directly to banks only once a supervisor is in place. To the extent that Spanish banks desperately needed additional capitalization to cover their bad debts, the ability of the Council to come up with legislation for a supervisor position in a timely manner—the upcoming German election notwithstanding—was crucial to stabilizing the market not only in the E.U., but internationally as well. The Council's members can be subjected to critique in this respect.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Is the Commission Blackmailing Britain?

In October 2012, the Daily Online reported, “Brussels officials are threatening to hit Britain with millions of pounds in fines in retaliation for pulling out of pan-European justice and crime policies.” It is the element of “retaliation” that was particularly provocative in the state known for its outspoken Euro-skeptic element. The E.U. cannot afford such an atmosphere to foment. Moreover, the dual-track trajectory should be fostered rather than retarded by the E.U. Government, due to the very different notions of the E.U. among the states.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Friday, October 12, 2012

2012 Nobel Peace Prize Winner: The European Union

In the modern world of organizations and the members who inhabit them, it perhaps makes sense that the Nobel peace prize would go to a government rather than to a particular official thereof. One immediate problem was figuring out which officials in the E.U. would accept the award. Martin Schulz, the president of the European Parliament, immediately issued a statement indicating that his institution expected to be part of the award ceremony. Herman Van Rompuy, president of the upper chamber, and Jose Barroso, president of the E.U. Commission, could also be said to have had legitimate claims in receiving the award on behalf of the E.U. itself. The absence of an “overall” figurehead in the E.U. is likely a result of Europe’s unhappy experience with “one man rule.” Indeed, the E.U. itself can be said to be a check on such nationalist excesses. In this regard, the peace prize provided Europeans with a change to catch their breath and take in the big picture amid an austerity/debt crisis.

The full essay is in Essays on the E.U. Political Economy, available  in print and as an ebook at Amazon. 

Thursday, October 11, 2012

A "Bronx Upbringing" Out-of-State: Tolerance in a Federal Empire

Typically, the American empire is assumed to refer to the hegemony of the U.S. in the world. “Imperialism,” in other words, is thought to refer to a major power imposing on lesser ones around the world—the influence being directed externally. I contend that the United States of America is itself an empire, even apart from its external influence, as the Union is composed of republics having distinctive cultures and on the scale of early-modern European kingdoms (e.g., United Kingdom, Switzerland, the Netherlands—which had been “international” in medieval times).


The complete essay is at Essays on Two Federal Empires, available at Amazon. 

Wednesday, October 10, 2012

Conflicts of Interest: Relying on a Wall Street Bank’s Safeguards

In October 2012 the Wall Street Journal reported, “the Financial Industry Regulatory Authority is examining how major investment banks and brokerage firms define and manage conflicts of interest between themselves and their clients.” Prime facie, defining and managing such conflicts between oneself and others can be regarded as itself a conflict of interest. It is perhaps a bit like the wolf negotiating with itself on its new job guarding the hen-house. I suspect that the regulators were going too far in attempting to translate “regulating” into managerial terms. The Journal goes on to ponder, “Will the first systematic look at conflicts on Wall Street in years make a difference for investors?” In my view, investors have good reason to be skeptical of the FIRA’s “manageralizing” approach.

The full essay is at Institutional Conflicts of Interestavailable at Amazon.

Sunday, October 7, 2012

A Separate “Eurozone” Budget: Two-Track Federalism

A separate E.U. budget of €20 billion, 0.2 percent of the GDP in the “eurozone” of the E.U., was proposed in the midst of the debt crisis to be spent in E.U. states that have adopted the euro. At the time of the proposal, the budget for the entire E.U. totaled around €130 billion, which was just over 1 percent of the E.U.’s GDP. While adding 0.2 percent to a federal budget that is just over 1 percent of GDP might seem insignificant to Americans, one might recall the first century of the U.S. (through 1860, and then from roughly 1870 to World War I), when the U.S. budget as a percent of GDP was roughly the same as a percent of GDP.

The complete essay is in Essays on Two Federal Empires, available at Amazon. 


The US Govt Budget as a percent of GDP      
Source: Gordon Tulluck

Homer on Heroic Leadership in Business

Can a merchant be a hero?  A manager in the grips of the business-leadership fad, which began in the 1980s, might reply, “yes, of course.” A hero in the corporate context is said to be a “champion,” “servant leader,” “coach,” or “visionary leader.” Hero and leader are typically conflated in society, moreover, without any real thought on whether heroes are necessarily leaders. A hero might rescue a damsel in distress without having any followers. It could be countered that Odysseus in Homer’s Odyssey is both a hero and a leader on his journey. However, of such a hero-leader, being a merchant would be excluded. Describing the attributes of Homer’s notion of the hero figure is instructive, for while the characteristics seem especially oriented or applicable to merchants, Homer takes pains to exclude the business caste from Odysseus’ heroic leadership.

Odysseus leading his men.  A business likeness?     Source: Maudandoscar.org

Material from this essay has been incorporated into The Essence of Leadership: A Cross-Cultural Foundation, which is available at Amazon. 

Monday, October 1, 2012

Different Unemployment Rates in E.U. States: Stretching Federalism Too Far?

For August 2012, the unemployment rate in the E.U. was 10.5 percent, which translates into 25 million Europeans without a job. In the U.S., the comparable rate was 8.1. These figures mask the huge inter-state differences in both unions, especially in the E.U. What impact do they have on the respective federal systems? 
                                 
                                                               E.U. Unemployment Rate.    Google

The complete essay is at Essays on Two Federal Empiresavailable at Amazon.

Sunday, September 30, 2012

“USA!” at Ryder Cup 2012: Silent “EU!” Wins

The Ryder Cup of 2012, held in Illinois, can be read as payback for the European team at the expense of the Americans because the latter had come back from the same 10-6 deficit to win at the previous Cup.  The Associated Press reported that the European team’s “rally was even more remarkable, carried out before a raucous American crowd that began their chants of "USA!" some three hours before the first match got under way.” I can just imagine the looks on the Europeans’ faces amid the primal shouts some three hours before play. “Why are they doing that now? Should we get our few people in the crowd to start pumping their fists in the air while shouting “EU! EU! EU! EU!”? I can just hear a German on the team (if there was one) ask, “But what purpose would that serve?” A Brit would interrupt to make his observation known, that he cannot take part in such a cheer as it diverts from “hip hip!” and thus may interfere with being proud to be British, as Maggie used to say. A Belgian of Flemish and Walloon parentage (if such a thing exists) would try to split the difference in proposing that the small crowd of European groupies chant “hip hip EU!” The Brit would undoubtedly veto that one in a split second and the European team would be left with having to listen to the primal chants of the Americans. Of course, the warlike chant has no meaning in itself. Even a patriotic American would wonder why in the midst of a fireworks show on July 4th young men (16-25ish) suddenly feel the need to aggressively shout “USA!


                                     Europe's Martin Kaymer celebrates Europe's win at the Ryder Cup.     Reuters

USA!” as if the exploding bombs (i.e., fireworks) were some signal known only to them that we were about to invade another country. I witnessed this at a Fourth-of-July fireworks at an upscale golf course in 2012. The chants seemed so out of place, coming out of nowhere, that I could not help but wonder what was behind the impulsive act.
Was there a sort of blind, patriotic “America the Powerful” brewing at a primal level among guys who are at the prime age for military service? Is there some instinct for war in young men that was not getting satisfied by the 11-year-old war in Afghanistan? Or was it simply a problem of not getting enough sex?  Maybe the pounding fists in the air and shouted grunts are some kind of instinctual way of attracting American females who are otherwise too obsessed with their careers.  I suppose it is preferable to pissing to mark one’s territory. Nietzsche would point to the instinct “will to power,” though it is difficult to see how much of that can come out of hitting a little white ball into a hole. It seems to me that American football would be the more fitting venue.
Today I met two Europeans, one from Spain and the other from Poland. I suggested that perhaps they had not realized how much they have in common as Europeans until they came over to America. Relative to the Americans, the two women could see how much more they have in common. “Yes!” the two women added as if on cue. “You know that many Euro-skeptics over there think there is no such thing as being a European,” I stated matter-of-factly. The both nodded affirmatively. “But now you can see that there is—that you can be both Spanish and Polish and European.” Again, they nodded, perhaps more surprised to be hearing such a thing from an American than to be suddenly aware of their own federal nature—both Spanish/Polish and European. Things like this can sneak up on a person perceptually, even though it is happening to oneself.  One might not see it in oneself even though outsiders do.
So even though the Europeans in the crowd at the Ryder Cup did not add “EU!” to replace the chants of “USA!” as the Europeans turned their deficit into victory, pro-Europe slogans will come, though hopefully without the fist-pumping and aggressive shouting.  Sometimes it takes time for the perception to catch up with the changed situation on the ground.

Source:
Christopher Clarey, “Europe’s Surge Leaves Americans in Shock,” The New York Times, September 30, 2012. http://www.nytimes.com/2012/10/01/sports/golf/europe-rallies-for-stunning-victory-at-ryder-cup.html?hp

Retirement Ages in Spain and Greece: On the Politics and Economics

According to the New York Times, “Spain has a stubbornly high budget deficit, its banks require tens of billions of euros in rescue loans and the government may soon have little choice but to request bailout funds” from the E.U.’s “TARP” program. Nevertheless, the state government’s “budget would actually increase pension payouts 1 percent [in 2013]. The money includes not only pensions for former public employees, but also the social security payments that go to all retired [residents].” Pension expenditures represent nearly 40 percent of the state budget and 9 percent of the state’s economic output, so one would think that line-item would be first up on the chopping block. One might assume that politics is the driving motive of the government, but it is also the case that cutting sustenance programs could actually exacerbate the state’s public debt, given the probably decline in demand. In this case, the politics in the state dovetails with the economics.
However, delaying the increase in the retirement age in Spain from 65 to 67 until 2027 can be seen as a case of politics operating at the expense of what is most needed economically for the state. Given the advances in modern medicine and the universal health-care systems in the E.U. (as distinguished from all but one of the U.S. states), even 67 could be too early to retire from work. As I write this essay, my parents are in their seventies and they both still work full-time. I know of many academic colleagues who are still active in their seventies, even if they are writing books rather than teaching. To be sure, the nature of the work is relevant. Not many people can dig ditches every day at age 75, but work suitable to an older body can be found (or created by the state).

Do the state governments have too much power at the federal level? If so, are Greece and Spain paying the price of the self-interest of more dominant states?  
In the case of the E.U. state of Spain, extending residents’ productive years adds tax revenue while reducing the spending needed for entitlement programs (medical disability is or should be an exception to the higher retirement age). This is particularly the case in states whose demographics are leaning toward an increasing proportion of retired residents.
The state of Greece demonstrates that going just from 65 to 67 can indeed be accomplished legislative in a year, even given the political protests. “For Greece,” according to the New York Times, “the longtime generosity of its pension system — in which large numbers were previously allowed to retire at 50 and younger — came to define the bankrupt condition of the Greek state. In the years before the crisis hit, pension payments in Greece totaled as much as 14 percent” of the state’s economic output. Raising the retirement age can be distinguished from the cuts in the monthly entitlement programs, which can actually put residents’ lives at risk.
From a human-rights perspective, the increases in human life-spans distinguish increases in the retirement age from cuts in monthly sustenance payments. Moreover, austerity programs need not come at the expense of human life. Programs based at that basic level can be set aside even as excesses in retirement ages (e.g., 50 in Greece for some occupations) can be corrected.
Lastly, the differential in the austerity programs in the states of Greece and Spain can be related to, or justified by, the differing situations of the two states. Accommodating such differences is a major plus of federalism. That is to say, the E.U. bailout program can and should distinguish in terms of its requirements the divergent situations “on the ground.” So to those who want to claim that the E.U. was not already by 2012 a federal system, I counter that it was already working at a very basic level (e.g., a common program, with different applications according to salient differences between the states).

Source:

Landon Thomas, “Pension Dilemma in Europe’s Debt Crisis,” The New York Times, September 30, 2012.