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Friday, January 11, 2013

Banking Lobby Extracts Benefits from Consumer Protector

Turning lemons into lemonade: that could aptly characterize the strategy of the banking lobby as the Consumer Financial Protection Bureau (CFPB) was promulgating a broad set of mortgage rules that were announced in January 2013. Rather than merely seeking to minimize more onerous standards, the industry sought to insulate itself as much as possible from getting sued by borrowers. Ignoring the rather obvious self-interest of the banks, the new regulators accepted the bankers’ claim that the legal protection was necessary for the banks to be willing to produce mortgages.
The full essay is at "Banking Lobby."

California’s Turnaround: Brown’s Budget Surpluses

By early 2013, California had turned the corner from deficits—$9 billion in 2011 and $25 billion in 2010—to anticipated surpluses—$785 million for the fiscal year ending June 2013 and $851 million in the year thereafter. The lack of balance between billions and millions suggests that Keynesianism may contain a fundamental imbalance in favor of consumption, at least in a democratic context. The prudent proposals by Jerry Brown, California’s head of state and chief executive, point to the ability of a republic to responsibly manage its fiscal business even within the overall imbalance.
                    Unlike a prime minister, Jerry Brown is not in the legislature, but in addition to being the chief executive he is also the head of state.

Specifically, Brown proposed raising total expenditures by 5 percent, which would not absorb all of the surpluses. Even though his plan would increase spending on education and healthcare, he “vowed to push back at legislators eager to raise spending quickly.” After years of cutbacks, it was undoubtedly very tempting to spend all of the surpluses while still being able to brag about a balanced budget. Yet giving into such temptation would entail considerable risk. “I am determined to avoid the fiscal mess that the last few governors had to deal with,” Brown told reporters as he introduced his budget proposal for the 2013-2014 fiscal year. That he was willing to hold even himself back from additional spending in education and healthcare is a testament to his sense of fiscal responsibility over even his own political ideology.

Put another way, Jerry Brown put his role as head of state above furthering a partisan agenda. That Democrats had won a supermajority in both chambers of the legislature makes his self-restraint all the more laudable. Indeed, Connie Conway, the Republican minority leader in the Assembly, said she supported Brown’s messages of fiscal restraint and support for education. Generally speaking, the voluntary self-restraint of the majority party for the good of the whole is supported by the minority party.

Brown’s attempt to set up a “rainy day” fund is prudent and thus in the interest of the republic. The minority party could hardly object. Even so, the proposal could have been improved by dedicating a sizable portion of the surpluses to reducing the government’s accumulated debt. Being debtless is itself a sort of “rainy day” fund in that the government would have greater leeway in raising new debt in a crisis. In Keynesian terms, taxes should even be raised as an economy improves—all that revenue going to paying off all the debt incurred in the last downturn. Whether stemming from an imbalance between booms and busts or in democracy itself, the tendency for government debt to accumulate even between cycles is a serious problem that not even Jerry Brown’s prudence fully answers. Even so, Brown could have done much worse in spending away the anticipated surpluses.


Jim Christie, “California Budget Surplus? Governor Introduces Plan That Eliminates Deficit,” Reuters, January 10, 2013.




Wednesday, January 9, 2013

Mistrust in Business: A Nietzschean Critique

In his commentary on the loss of trust in business, government and society, Michael Wolff laments to decline of trust through what he calls “consumer history.” As trust can be maintained with little or no further cost once established, Wolff is perplexed as to why more business practitioners, politicians and even religious functionaries do not rush to fill the gap.

The full essay has been incorporated into (or swallowed up by) On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available in print and as an ebook at Amazon.

Tuesday, January 8, 2013

Assad’s Absolute Sovereignty of Syria

By the end of 2012, over 60,000 Syrians had been killed and over half a million had fled as a result of the civil war in Syria. Shortages of food and shelter were worsening inside Syria for civilians. In early January of 2013, a spokesperson for the U.N. said that the international organization was unable to feed a million residents in combat zones. Acute fuel shortages in Syria were contributing to the rising price of bread—at least six times greater than the pre-conflict price. Additionally, an outbreak of violence in a large Syrian refugee camp of 54,000 refugees in Jordan amid a winter storm was reported. “The incident followed a night of heavy storms, during which torrential rains and high winds swept away tents and left parts of the camp flooded,” an official in Save the Children said in a statement. One might ask what was really behind the deteriorating conditions.
At first glance, the culprit is merely that of two centers of power fighting for dominance within Syria. World history had been littered with such conflicts. However, this explanation does not explain why other countries permitted the harm in Syria to worsen. Lest one be content to ascribe the impotence to a web of international alliances and politics, it can be asked whether principles could have been holding back otherwise willing interventionists.

In a rare public address, President Assad of Syria claimed early in 2013 that the sovereignty of Syria, which is for him the top principle, is “based on the principles and goals of the UN Charter and the international law which all stress on the sovereignty, independence and territorial integrity of countries.” National sovereignty is absolute. In making this well-established principle explicit, Assad could have drawn on western political theory—namely, the thought of Jean Bodin and Thomas Hobbes.
In the war-weary context of the seventeenth century, Hobbes wrote that the king needed absolute sovereignty, even as the definitive interpreter of divine law. Any constraint in the latter on a king would pertain to his afterlife, and therefore not bear on a king’s actual conduct. Jean Bodin too had viewed divine law as a constraint on otherwise absolute sovereignty, though for that theorist the king is not the definitive decider on divine law. Accordingly, such law could in principle act as a constraint on a king even in this world. Even so, other powers could not intervene at the expense of national sovereignty.
 Unlike Bodin and Hobbes, Assad defended absolute sovereignty out of fear that Syria would be brought into submission by foreign powers. “A country that is thousands of years old cannot be dictated to,” Assad said, by foreign powers.  “Syria has always been, and will remain, a free and sovereign country that won’t accept submission and tutelage.” Anything less than absolute sovereignty means becoming the vessel of an imperial power. In making this point, Assad could have drawn on dependency theory in international political economy. The sovereignty of developing countries is compromised or surrendered by their subservient economies. In being “allowed” to export only commodities, for example, a developing country could be at the mercy of one or a few countries that are the principal buyers. Those countries could keep the developing country from industrializing so as to retain economic and even political leverage.
In other words, Assad’s position combines the Bodin-Hobbes notion of absolute sovereignty with a theory of economic development that stresses the structural subservience of developing countries. In fact, dependency may lie at the root of Assad’s notion of national sovereignty. The problem with Assad’s rendering is that sovereignty can be viewed as limited without necessarily entailing submission to a foreign power.
Beyond the geopolitical and related mercantilist interests of particular countries, the international community could come to a consensus on how far a government can justifiably go in inflicting harm domestically under the principle of national sovereignty before outside powers would be justified in intervening. In terms of such harm, wounding or killing unarmed residents would trigger relatively close limits on national sovereignty, while the harm unleashed in a civil war would have a higher threshold. Rather than involving submission to the foreign powers, the limitations on national sovereignty would be geared to stopping the harm by removing the extant government from power. Once the government whose legitimacy had been lost internationally is expunged, the emphasis of the international community would turn to assisting the people in the construction of their own new government. To be sure, Assad would view such an approach as a cloak used by imperial Western powers to dominate Syria. The international community would thus be well-advised to stress its own restraint in placing limits on national sovereignty.
Given the sheer extent of harm inflicted on the Syrian population by the end of 2012, however, the international community would be justified in intervening in Syria to immobilize Assad’s government even without concern for the “submission” argument on behalf of absolute sovereignty. That the world stayed on the sidelines, essentially allowing the situation “on the ground” to worse so much, suggests that the dominance of the Bodin-Hobbes notion of absolute sovereignty was still too great, and thus should be subjected to critique. In other words, the powers around the world in favor of intervening should not have felt like they would be imposing in stepping in to stop the violence. The notion of a country being under temporary international occupation because a government had lost its legitimacy due to the harm inflicted or permitted was well overdue even before Assad’s government had gone after unarmed protesters.
The matter of default itself, particularly its staying power (as though a house guest who will not leave), is the true culprit that kept the world at bay as Syria degenerated in a cycle of increasing violence and suffering. Why it is that the default can continue to enjoy hegemony even when it should be subject to critique—this is the underlying question before us here.
Assad can claim that Syria’s sovereignty is absolute. This does not necessarily make it so, even ideationally. He can claim that absolute sovereignty is a necessary bulwark against becoming the agent of another country, but this does not mean that is assumption is valid. In making his claim, he could rely on the default and thus count on the related trepidation of the international community in intervening even to stop horrendous suffering.
If the U.N. is necessarily bound to the notion of absolute sovereignty (even if kept so by one member’s veto), then the international community would be well within its prerogative to form a new international organization (even without necessarily having to leave the U.N.)  that is oriented to placing and enforcing limits on national sovereignty. Such an organization would say, in effect, “No, we will not stand by as great harm takes place within a country.” Would not bystanders be justified in saying something similar as a boyfriend beats his girlfriend in public and restraining the man? Were he to claim that being restrained in that instance would imply or result in him becoming a slave would hardly be taken seriously, and yet Assad’s claim of Syria’s absolute sovereignty had its defenders abroad and even held other powers at bay when they would have been justified in intervening to stop the harm. Were the dogmatic basis of Assad’s claim made transparent (i.e., obvious), the notion that sovereignty is somehow absolute would finally be viewed as artificial in nature rather than as part of the basis of Western civilization; the demise of the reigning default would not have to wait generations needlessly before being realized.


Rick Gladstone and Nick Cumming-Bruce, “Aid Groups Report New Level of Misery Among Displaced Syrians,” The New York Times, January 8, 2012.