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Friday, October 5, 2012

Romney’s “About-Face”: A Candidate’s Conflict-of-Interest

As was demonstrated in September 2008 as banks began to stop lending to each other even overnight, trust is the foundation, or grundlagen, of a market. The same is true in relationships between people. I would be surprised were a marriage ever the same after even a contrite spouse has had an extramarital affair. The same is true in politics; once the electorate has been lied to, it is very hesitant to remove the asterisk next to the politician’s name. The relevance of a politician’s extra-marital affair, such as the flowery lapse of Gary Hart or the sordid stains of Bill Clinton, is that the people conclude that they, like the wives, could be betrayed. Once established, a lack of trust tends to spread like an invidious cancer until it has encompassed the entire body politic. The shift is from justice to a lack of harmony on many levels.
 
Plato theorized that justice is the harmony within the rational psyche and polis (city, or country) as well as between the heavenly spheres (planets and stars)—the harmony between the rational and the vibrations of the spheres being in sync, which is justice itself. It follows that a person who lets his or her desires run rampant is in line with a squalid or aggressive city, and that neither of these shares in the musical/mathematic harmonious vibrations of and between the heavenly spheres. Lack of trust at the personal, business, or civic level can be said to be a symptom of the shift from the condition of harmony, and thus justice, to discord.
 
It follows that in a republic or union thereof, it is vital to maintaining justice (as harmony) that the electorate not be as sheep in taking in that which a politician claims regarding what he or she “really believes.” Once a candidate has stupidly lapsed in terms of trustworthiness, the electorate should be cognizant of the conflict of interest in the candidate later dismissing the substance of his or her real feelings or beliefs. In general, if a candidate’s statement is in line with him or her getting elected, a due dose of salt should be taken with that dish.
 
I have in mind Mitt Romney’s statement at a closed-door fundraiser in September 2012 that nearly half of Americans don’t pay income taxes, view themselves as victims, and refuse to take responsibility for their lives, wanting to live off entitlement programs instead. Some seventeen days later, after even prominent office-holders in his own party distanced themselves from his view, the presidential candidate stated publically, “In this case, I said something that’s just completely wrong.” The question is whether this electorally-convenient “change in belief” is believable, given its consistency with electoral victory.

              Mitt Romney and Paul Ryan, in an image tailor-made as "brand image" for generic consumption.  Reuters
 
For an electorate to be like sheep is to ignore the conflict of interest and take at face value whatever a candidate says. Simply being on television brings with it the veneer of official truth, so it is difficult for a “mere viewer” to discount the veracity of the celebrity’s claims based solely on one’s own subjective judgment. In a democracy, however, such judgments constitute popular sovereignty, under which governmental sovereignty is exercised by public officials. Therefore, the citizenry has a responsibility to place its judgment above the larger-than-life asseverations made by candidates or office-holders at mass rallies or on television. The deck, I fear, is stacked against popular sovereignty in favor of the agents, and television has exacerbated the problem even as the medium has enabled voters in an “extended republic” to “see” more of the candidates (or their marketed “brand” image).
 
To aid the electorate in its subjective judgment made in the privacy of each mind, a few principles may be helpful. First, as stated above, a candidate’s statement made in contradiction to an earlier one and in line with his or her electoral success on election day is subject to a conflict of interest. In other words, the claim that the candidate had been wrong should not be taken at face value if it, unlike the earlier claim, is in line with getting elected.
 
Mitt Romney’s statement disparaging nearly half of the electorate can reasonably be assumed to be at odds with him winning the election (even making such a statement privately may be a lapse of judgment effectively disqualifying a candidate from any high office in which using good judgment is crucial).  Romney's later claim that his earlier privately-expressed view had been “just completely wrong” can be taken to be in line with his political interest. This pattern, or "switch" in line with political interest, constitutes a conflict of interest because he could reasonably be assumed to be lying in his later statement in order to improve his chances of winning. That the earlier statement had been made in private whereas he announced his “change of heart” publically involves a second principle.
 
That which is said privately can be taken to have more credibility than that which is stated publically. This is a less direct way of looking at the conflict of interest. A candidate may express his or her authentic beliefs privately because doing so publically would not be in line with winning the election. The switch from private to public after the private statement is leaked is particularly suspect because it is reasonable to assume that the public statement is not genuine, but, rather, is geared to reducing “political damage.”  For the public to assume that the candidate has recognized his or her error and that the public statement is a sort of contrition ignores the conflict of interest. In other words, the sheep mentality is naïve, more a matter of idealistic projection than in what is actually motivating the candidate.
 
Self-governance, whether of a psyche or in a republic (or union thereof), includes governing one’s own fantasies and projections in order that one can more accurately assess candidates for office and office-holders. Here again is Plato’s notion of justice in the reason-governed psyche being in line with the reason-governed polis (electorate). Being intellectually honest in one’s assessment of even one’s ideologically-favored candidate can be said to be one of the duties of citizenship if self-governance is to apply both to a person and a republic. Letting candidates get away with double-talk is a case of an undisciplined psyche and electorate of a polity not worthy of government by the people.
 
Whichever way an electorate leans in its collective judgment in a given election, it is my hope that the judgment illustrates the best in popular sovereignty. It is essential, albeit difficult for a large electorate, to hold the agents (even as candidates) accountable to the will of the people, such that the collective will is rendered as clear as possible and that the agents implement it rather than assume (or presume) a superior position to it.

Source:

Colleen Nelson, “Romney Backs Off Remarks About the 47%”, The Wall Street Journal, October 5, 2012.

Tuesday, October 2, 2012

Investor Assessments of Political Events

Although the various investors in the financial markets doubtlessly pay great attention to important political events, such as were a state in the E.U. to default on its bonds, I suspect that market analysts overstate the importance of more commonplace political events. For example, the New York Times reported in late September 2012 that investors were shifting their portfolios to reduce risk out of uncertainty regarding the upcoming American elections and the ongoing negotiations in Congress to avoid the huge budget cuts and tax increases set to begin automatically at the beginning of 2013 and run for a decade. Additionally, fears that E.U. leaders might hesitate on moving forward with the bailout program oriented to indebted states were prompting investors to be more risk-averse. Generally speaking, analysts were “anticipating that politicians may not act until forced,” both in the U.S. and E.U., “setting the markets up for weeks of angst.” In my view, this account is overstated.
 
“Right now, we’re much more defensive than we were a few weeks ago,” Martin Leclerk of Barrack Yard Advisors said at the time. He had shifted 20 percent of his company’s assets to the safety of cash. More broadly, investors were cashing in their gains, according to the Times, “on riskier stocks and moving into bonds and safer stocks, like consumer discretionary companies that are not as susceptible to a downturn in the economy.” Rather than presume that all this stemmed from uncertainty regarding the American elections or even the anticipated budget sequestration of the U.S. Government and the E.U. bailout program, I submit that the investors were taking a general reading of the global economy to assess how much economic growth would be likely in 2013. In this regard, the announcement by the Chinese government of stimulus spending is more significant than who wins what offices in the U.S. or whether the E.U. officials are really hesitating on Greece and Spain. The minor presidential election drama fueled by an all-too-innocent media and even the manipulatory threats by E.U. leaders as if jockeys bending the whip to get Greece to pony up rather than lax off are both dwarfed in financial importance by assessments of how the world economy as a whole is likely to do. Specifically, the question is whether the lower growth in China will be tolerated by government officials, and if so, whether that growth would be enough to offset the sluggishness in the E.U. and U.S. The U.S. economy in 2013 would not likely hinge on which party wins the White House because the other party typically has a veto in the U.S. Senate thanks to the ubiquitous filibuster. In the E.U., hesitations should be read more as efforts to manipulate certain recalcitrant state governments than as serious attempts to scuttle the bailout program. Elections do matter and programs do change, but the trajectory based on the status quo has such tremendous gravitational pull that even mandates tend to get watered down by the time they get implemented.

                                                                                                          Does expertise on these make one an expert on politics?  
 
Therefore, I suspect that the market discounts political “news” that you and I are presented with as “important” and “vital.” Often times, the importance is magnified in order to sell ads. The world economy is remarkably steady-state, and wise investors undoubtedly take a long-term perspective rather than allowing themselves to become ensnared by the titillating excesses fomented by the media. To be sure, jolts such as the effect the financial credit-freeze in September 2008 had on world trade do matter in terms of contractions in the world economy, and investors are smart to become more risk-averse in anticipation of such periods. Even so, a near collapse of the global financial system can be distinguished from which corporate party wins the White House in a certain election cycle or how an internal tiff among E.U. leaders (or states) gets resolved. My point is simply that elections are not usually the beginning of major course changes (and I am not even sure those have such a bearing on the economy as a whole), and that squabbles in the E.U. do tend to get resolved somehow or other. Neither "event,"  therefore, is earth-shattering even if it makes for good television. I suspect that investors know this and discount the white noise accordingly.

Source:

Nathaniel Popper, “Fearing Fiscal Cliff, InvestorsCash In and Seek Safety,” The New York Times, September 28, 2012. 

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 Empires.

Kremlin Curtailing Federalism and Democracy in Russia

When it looked like Igor Morozov, an insurgent candidate from within the local nomenklatura in Ryazan, Russia might beat the Kremlin-appointed incumbent governor in 2012, the Kremlin summoned Morozov and the next day he announced that he was dropping out of the race. He would be appointed a senator instead. His campaign, he explained, had created the “threat of a split in society.” In actuality, the success of his candidacy was undermining the federal government’s control of the governor races. Federalism, it would seem, is expendable in the Russian empire of regions and republics.

                                                                                                  Igor Morozov, campaigning before the Kremlin intervened.  Kommersant.
 
Sergei Salnikov, the deputy secretary of United Russia Party in Ryazan, had crossed party lines to back Morozov. He pointed to the cost in terms of democracy—the right of the people to cast votes to decide a competitive election. He liked the effect of the Kremlin’s “managing” of the race in lieu of competition to a rapist of sorts of the people. It’s “as if you have simply been raped,” he said.
 
To be sure, Putin would not liken his “presidential filter” of candidates to the activities of a rapist. The filter itself contains a structural conflict of interest because a candidate for governor must secure the endorsement of 10 percent of the republic’s lawmakers, who are heavily dependent on the sitting governors. Incumbents can thus see to it that “paper tigers” are put up as the opposing candidate such that no real competition exists.
 
Moreover, from the stand point of federalism, a conflict of interest exists in the Kremlin’s “filter” for “criminality.” For the Kremlin to filter candidates for a republic-level election renders the “state level” as subordinate to the contours established by the federal government. The result is a trajectory toward political consolidation at the expense of any checks and balances of federalism.
 
Therefore, democracy is not the only casualty of Putin’s power-grab occasioned ostensibly by political protests. The Russian political elite can ensconce itself at the expense of not only popular sovereignty, but also federalism, which is ideally suited to the inherent diversity among republics in an empire. Soviet tradition dies hard, whereas democracy and federalism are quite fragile in their growth stages. The Arab Spring demonstrates this in regard to democracy, and the E.U. illustrates the difficult growing-pains of federalism in its teenage years.
 

Source:

Ellen Barry, “Not in Script For Kremlin: A RealRace For Governor,” The New York Times, September 28, 2012.

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.