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Saturday, February 11, 2012

Obama’s Educational Waivers: Toward the Political Consolidation of an Empire

A decade after the No Child Left Behind federal law was enacted, “President Obama freed 10 states from some of its crucial provisions.” The states’ freedom from a deadline for bringing all students to proficiency in reading and math by 2014 came with strings—accepting Obama’s own educational agenda, which focuses on accountability and teacher effectiveness and includes higher standards than the ones set in NCLB. Many state education officials have criticized the 2014 deadline as “an impossibly high bar” that “did not take into account the needs of some of the most disadvantaged children.” In announcing the waivers from the deadline, Obama said that the goals of NCLB should be met “in a way that doesn’t force teachers to teach to the test, or encourage schools to lower their standards to avoid being labeled as failures.” However, if the standards are to be even higher, might even fewer schools wind up passing—even if the deadline is extended?

In assuming that the setting education policy is one of the enumerated powers of the Federal Government, Obama was applying a “one size fits all” approach over what is essentially an empire of differing republics. Furthermore, having so much power over the states on education policy, the Obama administration was compromising the check and balance feature of federalism wherein the states are to act as a check on federal encroachment just as the federal government is to act as a check on states violating the rights of, or not providing for, their respective citizens. In other words, the significance of NCLB and the Obama administration’s own attempt to standardize education policy in the states through the spending clause of the U.S. Constitution (which alone is a stretch) goes well beyond education policy. The viability of the system of government in the United States can be seen to be severely compromised just in the president’s attitude toward the states—as if they were children and he was daddy.

Ken Wheare argues in his text, Federal Government, that state governments need be autonomous of federal authority in only one area for modern federalism to work. Wheare also extolls the mutual check and balance feature of federalism (as distinguished from a confederal alliance). The point I would like to make is that if the states of a federal system are “free” only in one domain, they do not have a sufficient basis of power on which to act  as a viable check against the encroachment of federal power over that of the states.

Where the federation is on the empire scale, such as the E.U., Russia, and the U.S., the consolidation that comes with federal encroachment means that inherent differences across the lands within the federation are stifled or ignored. Built-up pressure is not good for ongoing political stability. Policy itself tends to be of compromise that no one would independently want, rather than tailored to the particular political societies within the federation. As of at least the beginning of 2012, Europe has seemed more aware of the need of particular states to legislate for their respective polities  than has America.

As Justice Sandra Day O’Conner once said, “Congress is acting like a state legislature.” Such a significant category mistake cannot be good for the viable of a republic of republics—what Montesquieu referred to as wheels within a wheel. If all of the wheels within the wheel of the whole cannot operate at least partially independently, then any problem in the mechanism can quickly bring the entire mechanism to a quick stop. Like genetic diversity with respect to health, semi-sovereign diversity is necessary for political stability where the federation is on the empire-scale (i.e., inherently heterogeneous). We focus only on the substance of education policy at the expense of the impact of  the “how” on our system of public governance at our own peril. As long as it has interlarded itself into the classroom, perhaps the Federal Government should mandate that federalism be taught in Civics. It is more than a little disconcerting that the White House staff and their boss might need to attend such a class before being able to grasp the importance of the topic.

Winnie Hu, “10 States Are Given Waivers from Education Law,” The New York Times, February 10, 2012. http://www.nytimes.com/2012/02/10/education/10-states-given-waivers-from-no-child-left-behind-law.html

Friday, February 10, 2012

The Descendants: A Matter of Character

In the 2011 film, The Descendants, George Clooney plays a character who must wrestle with several trade-offs bearing on character itself. Both the acting and the screenwriting handle the task very well. It is a pity that the actor gets a near monopoly of the credit/attention, for the way the trade-offs are navigated by the screenwriter is vitally important—perhaps even more so than the acting.

For example, the decision is made in the writing whether the character will cash in on instant gratification or protect the interests of people who do not deserve any such protection. Moreover, the screenwriter weighs how many of the character’s decisions will side with principles over expediency and how many will reflect instant gratification.

Clooney’s character decides not to harm an antagonist in one way and then decides to take something away from that same antagonist. The taking away is consistent with a societal principle, but is nonetheless part of the motivation. Interestingly, the decision not to harm the antagonist even though such harm would be totally justified contributes to the antagonist effectively undoing that protection.

Generally speaking, deciding not to pounce when one would be justified in doing so can eventuate in the protagonist “having his cake while eating it too.” Acting on principle rather than satisfying immediate gratification can involve or trigger a “multiplier effect” wherein “what goes around comes around” for the offending antagonist. The protagonist acts on the basis of character—which is beyond ethical obligation—and eventually can realize satisfaction, only here due to the antagonist’s flaw unraveling rather than to any complicity by the protagonist.

Deciding to be merciful at the expense of instant justification may trigger something in nature that eventuates in one eventually receiving an even greater benefit “with interest.” In illustrating this dynamic, the screenwriter teaches a modern society of instant gratification an important lesson and provides a role model for us all.

For more info on the film, please see http://www.imdb.com/title/tt1033575/

Thursday, February 9, 2012

Conflicts of Interest and Paradigm-Shifts: The Case of Financial Regulation

It is perhaps all too easy to perceive a sea-change in perception when the reality of societal change is much more gradual. There is something to the argument that John D. Rockefeller’s reputation was salvaged in the 1930s not because the old man was passing out dimes, but, rather, simply because he had outlived his critics. Similarly, Thomas Kuhn, in his text on paradigm changes in scientific revolutions, bemoans that the advocates of a default theory must finally die off before their darling can finally be replaced by a new one. In other words, any given person is not apt to shift paradigms. The culprit, I suspect, is pride, which Augustine suggests in his writings is inherently self-idolatrous. I believe the human brain is capable of accepting inter-paradigmatic change, just as a person can be humble. That this is not the norm does not mean that we ought not raise our expectations to it.

Even after Alan Greenspan admitted in Congressional testimony that there is a fly in the ointment of his neo-classical economic (free-market, or laissez-faire) paradigm—namely, that the market mechanism freezes rather than “prices out” at a certain risk (that mechanism may even increase volatility)—there were calls for deregulation as if September 2008 had not occurred. Just as some voices had called for the repeal of the Sarbanes-Oxley law, which strengthened accounting safeguards, voices were calling for the repeal of the Dodd-Frank law of 2010.

According to Jesse Eisinger in early 2012 when Dodd-Frank was at risk for being emasculated via the vested interests of Wall Street lobbying in Washington, D.C., when Sarbanes-Oxley was passed, “it was attacked almost exactly the way Dodd-Frank is today.” He notes that the main criticisms of Sarbanes-Oxley did not pan out. “Corporate earnings have soared, and no company has ever missed a quarterly estimate because it was spending too much on its accounting and internal controls.” I contend that Wall Street’s contention that additional regulations mean more costs is a ruse. The real culprit is perceptual: it is as if September 2008 had not occurred. In other words, perceptual denial is what ultimately holds paradigm-change back. Beyond the obvious financial interests, I suspect the intransigence is rooted in ideology, for it even more than money can be immune from recognizing those nasty facts that would otherwise get in the way.

Therefore, in listening to someone’s plea for deregulation of Wall Street, you can marvel that the person has blacked out the crisis of 2008 from his or her mind. Why can’t the unregulated derivative securities markets work? It is as though the person has amnesia. If I am onto something here, the natural reaction is not to argue but to be stunned—thinking there must be something psychologically wrong with the person. In the end, ideology can be viewed as a sickness of the brain that so distorts perception that the person bears symptoms of denial akin to those of alcoholism. Only a fool argues with an alcoholic who insists he can handle a drink. But what about last night? . . . What about last night? . . . Never mind. It is pointless to argue. The problem is that policies such as financial regular are subjected to argument and debate in a democracy, so one can find oneself arguing whether September 2008 even happened.

It might be that like Rockefeller’s reputation, the need for additional financial regulation to thwart a repeat of September 2008 might have to wait until the critics have died off. In the meantime, we can expect Wall Street lobbyists to continue to turn Dodd-Frank into Swiss cheese.

Although paradigm changes cannot be foisted on the unwilling, that they have such a huge influence on matters pertaining to their vested interests (and involving their denial) ought to breach our own denial concerning their conflict of interest in being involved at all. In other words, people ideologically invested in the free market sans government regulation may dig in for their duration, but the rest of us need not give them a veto in the process of cleaning up after a spill that we firmly believe has indeed occurred.

Therefore, we should take Eisinger’s optimistic verdict on Sarbanes-Oxley that “accounting disputes are finished before they start”—even though CPA firms still face an institutional conflict of interest—with a grain of salt. The accounting industry has not been “cleaned up.” For all the criticisms of Dodd-Frank, Eisinger claims “there has been a societal change in our views. Few can sustain an argument in favor of a gigantic, self-serving and rapacious financial sector.” I respectfully disagree. Plenty of free-market advocates still exist, and with them, the risk of a systemic financial collapse related to insufficient financial regulation. Paradigm shifts do not happen as quickly or as neatly as Eisinger supposes, and the cause is lodged in the ideological perception of the defenders of the pre-existing paradigm. It is remarkable that a paradigm that Alan Greenspan told Congress has a fatal flaw can still be viewed as whole, even as September 2008 is effectively denied even as having happened at all.

We can look to Augustine, who differed from Paul in claiming that pride rather than acquisitiveness is the chief sin. I would simply add that pride can wreak havoc on perception by means of ideology, effectively arresting or at least delaying paradigm-shifts. I do not view this as inevitable, and one way of not having to wait for the twentieth century to die off would be for the American people to insist that parties having a vested interest in a policy not be allowed to participate to such an extent in it. Beyond prohibiting Wall Street from being able to write its own regulations officially, we would have to have the will to do so, as a societal value, such that even informal attempts by the vested interests are rebuffed as inappropriate (and unseemly). This suggestion is admittedly idealistic, particularly given the rather pro-business culture in the U.S., wherein ideological denial can extend far beyond vested interests where business is concerned. Also, the myriad number of access points in the federal government alone make obviating even such a clear (though typically denied) conflict of interest extremely difficult. We might be left with having to wait for the old paradigm to die out. My modest point is that this need not be. For all the advancement technologically in ipods and ipads, smart phones and blackberries, perhaps we as a society ought to lend a little brain power to the matters of conflicts of interest and paradigm-shifts.

Jesse Eisinger, “In Finance, Past Hints at Future,” The New York Times, February 9, 2012. http://dealbook.nytimes.com/2012/02/08/to-envision-dodd-franks-future-look-to-its-predecessor/

Wednesday, February 8, 2012

Leadership Vision at Facebook

On Charlie Rose in early 2012, a former CEO of Coke told Charlie that companies view corporate social responsibility as lying within the domain of strategy. Specifically, it is in a company’s strategic interest that its sources of raw materials do not “dry up.” A corporation’s societal responsibility dovetails with its interest that the corporation’s own “footprint” (a.k.a. “Big Foot”) not put the company’s own survival at risk. One could say a company is “responsible” (as if it were felt as a duty rather than simply self-interest) for safeguarding those things on which it depends. In other words, it goes out from its immediate interest in securing supplies to assume a “societal” role in protecting the sources themselves, as if acting as a good citizen. The motive is more like stewardship—the objective being maintaining an ability to extract the material in the long term. Profit, in other words, is foremost, and any word of duty is mere marketing. This does not mean that leadership vision beyond profits as an end is a façade.

The full essay is at "Taking the Face Off Facebook."

Tuesday, February 7, 2012

Refusing for its Own Sake: Israel on the Palestinian Unity Government

President Mahmoud Abbas of the Palestinian Authority reached a deal for a unity government with Hamas on February 6, 2012—which was also the sixtieth anniversary of the Accession Day of Queen Elizabeth II of Britain. Prime Minister Benjamin Netanyahu had warned that a unity government with Hamas would rule out any chance of making peace with Israel. Meanwhile, the E.U. and U.S., as well as the state of Israel, had conditioned recognition and aid to Hamas on that party renouncing violence, recognizing Israel, and agreeing to previous agreements reached between the P.L.O. and Israel. In short, for all that achieving a unity government requires in terms of hard decisions and effort, the accomplishment was not exactly valued by Israel and the West. Aside from the baleful consequences in refusing to recognize something of value out of stubbornness and inflexibility, Israel and the West may have been hurting themselves by ruling out a chance for peace at the outset.

“Hamas is an enemy of peace,” Netanyahu said. “It’s an Iranian-backed terror organization committed to Israel’s destruction.” Doubtless that description reflects Hamas historically, but in sticking to the description, it was the Prime Minister rather than Hamas that was cutting off any chance of peace. He was ignoring or dismissing the possibility that Hamas could change as a result of negotiations and a deal. Part of what happens as two parties negotiate and reach a deal is that the parties’ respective perspectives and interests can also change. To condition the negotiations themselves on the other party already having changed is illogical, besides being utterly unfair to that party irrespective of whatever its past may or may not have been. It is essentially to presume that that which takes place during negotiations must somehow occur beforehand—and for only one of the parties. In continuing to build settlements, Israel has not exactly been kosher going into the negotiations; Abbas’s unity government could insist that Israel itself change as a condition for negotiations to begin.

Ironically, Abbas’s unity government may be requisite to any agreement, for otherwise Hamas would be outside any such deal. Presumably everyone concerned must be part of a peace deal for peace to ensue. Therefore, Israel as well as the U.S. and E.U. would be wiser not to look the gift horse in the mouth—meaning complain about that which is really a gift to them. Abbas has undoubtedly had to swallow hard to accept a unity government with his rival. He is due credit for this, and his action should be recognized for what it is: a necessary step on the way to a definitive agreement between the Palestinians and the Israelis. At the time of Abbas’s announcement, it would have been wise for Israel and the West to seize the opportunity of the unity government rather than view it as ending any chance of an agreement.

The lack of change projected onto Hamas was really in its adversaries. “Give peace a chance” means being willing to relax one’s stubbornness such that one can change. The change needed is ultimately in oneself—not the other guy. With this on one’s plate, to worry oneself with the other’s change involves a rather presumptuous overreaching that one can ill-afford. This is not to say that the other guy has been an angel. Hamas has been far from it, but the same could be said of Israel. It takes two to tangle, and angels have no need for peace talks. Sometimes appearances can be deceiving here on earth. The smallest excuse may easily be made use of by the party most interested in sustaining a feud. If there is anything that must change before negotiations can begin, it is this: a refusal to come to the table, presumably conditioned on some change in the other guy other than his refusal to come to the table. The refusal usually says much more about the refuser than the refusee.

Ethan Bronner, “Abbas Will Lead the Palestinians in a Unity Pact,” The New York Times, February 7, 2012. http://www.nytimes.com/2012/02/07/world/middleeast/palestinian-factions-reach-unity-deal.html?ref=todayspaper

Monday, February 6, 2012

Windfall Oil Profits

According to the New York Times on February 1, 2012, Conoco Phillips reported a 66% increase in earnings for the fourth quarter of 2011, “attributed to high crude prices and asset sales.” With the prices of most crudes above $100 a barrel, the company gained a windfall that vastly made up for a drop of nearly 3% in its refining and marketing business. Chevron, on the other hand, reported a 3.2% decline in fourth-quarter earnings due to “poor refining results” that “overwhelmed higher revenue from oil sales.”

Meanwhile, Exxon Mobil reported net income of $9.4 billion for the fourth quarter, up from $9.25 billion the year before. The company’s revenue of $121.6 billion was up 16 percent. According to the Times, the improved earnings reflect the $100 plus prices for many benchmark crudes, which resulted from “continuing unrest in the Middle East and North Africa and strong demand from China and other developing countries.” To be sure, the company’s purchase of XTO Energy for $25 billion in 2010 meant that the plummet in natural gas prices also had a significant impact on the company. Even so, a company making nearly $38 billion on an annual basis raises questions on the sheer size alone, and whether any market can be competitive with such a giant.

Furthermore, the legitimacy of the windfall profits coming from political instability rather than any merit on the company’s part should also be questioned, as well as why Congress balked on a windfall profits tax for the industry in 2011. In other words, the market power is not the only kind of power we should be concerned about in looking at Exxon Mobil. Such a concern could extend to why George W. Bush decided to invade Iraq, given that that that country’s ruler had kicked American oil companies out in 1993 after the U.S. intervened to move the Iraqi army out of Kuwait. We could even ask whether the oil companies, or their agents in government, have had anything to do with the inciting some of the political stability behind the astronomical crude prices.

To be sure, Chevron shows us that even a big oil company can manage not to benefit from a $100-plus crude-price windfall. Moreover, oil executives could argue that windfalls are “necessary” as “cushions” against the prospect of a glut in natural gas, for example, or the need to do major work on aging refineries. Even with the inevitable vicissitudes that come with dealing with raw material markets, however, that the prices of crudes have gone so much higher than the costs of getting oil out of the ground suggests that the market mechanism has not been functioning as Adam Smith would have predicted—meaning an oligopoly has replaced a competitive marketplace.

John D. Rockefeller, whose effort to coordinate the refining industry in the U.S. via a huge monopoly called Standard Oil (of which Exxon Mobil is a descendant), could point to all the bankruptcies amid the “excessive competition” in the 1860s as justifying even a monopoly in place of any competition at all. He used means that would be considered very unethical today to get competitors to “agree” to be bought out by the combination so there would be no “destructive competition.” Even if it was necessary in the early years of the oil industry, we ought not assume that huge oil companies are necessarily the legacy we must pass on to the next generation.

Clifford Krauss, “Higher Oil Prices Raise Earnings at Exxon Mobil,” The New York Times, February 1, 2012. http://www.nytimes.com/2012/02/01/business/higher-oil-prices-lift-profit-at-exxon.html