Obama Mimics Cameron's View of the E.U.

President Obama has said he “wants a strong UK in a strong EU.” In his joint news conference with David Cameron of the EU state of Great Britain on May 13, 2013, the president elaborated on his earlier statement in a way that reveals his view of the EU as an entity. In short, he shares Cameron’s view that the EU is essentially a number of economic relationships rather than a political union of states.

The full essay is at Essays on Two Federal Empires.

Big Banks Opposing Anti-TBTF Regulations: A Conflict-of-Interest

Being able to count on a person or company thereof having sufficient motivation to provide a self-defense is no feat, for self-interest is a staple—perhaps the staple—in human nature.  It should be no surprise, therefore, that after raking in $102 billion in subsidies, including lower lending costs due to the general perception that the government would bail them out, and repaying the TARP money, the biggest American banks were sufficiently re-energized (i.e., self-motivated) to go on the offensive to protect their places on the perches under fire. Specifically, they planned a lobbying campaign to fend off increasing Congressional calls to break up the banks to solve the too big to fail problem (which includes the subsidy problem that exacerbates the wider problem). There are problems with the lobbying itself—problems caught in America’s blind-spot even as they subtly undermine the body politic.


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Does Austerity Work?

Does raising taxes and cutting government spending reduce a government’s deficits and thus debt? Confine consideration to more tax revenue and less spent and the theoretical answer is yes; it being a simple matter of mathematics. Include the impacts of raising taxes and cutting spending and the answer become far less straightforward. More paid in tax means less disposable income, which means less consumption and thus less produced (i.e., GNP). A government spending less also means less consumption in the economy, and therefore even less to be produced to meet demand. In short, austerity is recessionary. Whether the ratios of deficit and debt to GDP increase depends on how much the numerators drop relative to the decrease in GDP. We can look at the E.U. for some empirical evidence.

 If austerity kills dignity, then pressure on governments to relax spending cuts can be expected.   source: rt.com

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

Gilding the Dandelion: Management as Leadership

Wendy Lea, the CEO of a customer “experience” start-up, discusses her leadership approach in an interview with the New York Times. I contend that what she takes to be leadership is actually management. Put another way, she is gilding the leadership lily. Unfortunately, that practice is ubiquitous in the business world. 

Material from this essay has been incorporated in The Essence of Leadership, also available at Amazon in print and as an ebook.

Source:

Adam Bryant, “A Leader’s Test: Balancing Drive andCompassion,” The New York Times, May 3, 2013.

Should Icelanders Push for E.U. Statehood Anyway?

In late April 2013, a slight majority of Icelanders who voted in the parliamentary election went for a return to the center-right Independence and Progressive parties even though they had been responsible for the banking crisis that bankrupted Iceland. The two parties promised to forgive or renegotiate the Icelanders’ personal debt and end the four years of austerity by lowering taxes, ending capital controls and stimulating foreign investment, according to the New York Times. The center-left governing parties, including the Social Democrats, had cut spending and raised taxes, making the carrots being offered by the center-right parties all that more alluring. Although not the main issue of the election, the prospects for Iceland becoming a state in the European Union lessened significantly with the ousting of the center-left government. Unlike that government, the center-right parties voiced skepticism and advocated a referendum before any the government would take any further steps. In the wake of the election, it might be helpful to reflect on whether Iceland should become a state. After going over some economic and political factors, I want to highlight subtler factors whose influence is typically understated in newspaper headlines.

The complete essay is at Essays on Two Federal Empires.

From this perspective, it can be said that Britain are Ireland are part of Europe, but what about Iceland? Source: luventicus

Return of the Mortgage-Based Bonds: Another Bubble in the Making?

In case it has been a while since you have been entertained by going around in circles while sitting on a painted wooden horse, permit me to re-introduce you to the Merry-Go-Round, a staple at virtually any amusement park.

The world itself might just be such a ride, with us mere earthlings playing out our respective roles while spinning around and around as the world goes by once and then again, and again. Lest it seem monotonous to go around in circles, it is possible—at least in principle—to learn something new on each pass.  Weighing against a learning-curve that might thwart an eternal recurrence of past failures are other, less salubrious proclivities of the mind. These include (but are not limited to) avarice, power, and even the force of habit. More damning still may be the arrogance of pride—the hubris of presumption. 

The full essay is at Another Bubble.

Britain Challenges the E.U.’s Financial Transactions Tax

In April 2013, the state of Britain mounted a legal challenge at the European Court of Justice against E.U. financial transactions tax (FTT) going into effect in eleven other states. The way in which the challenge was depicted by state officials in Britain suggests that the real challenge was not just to more European integration, but also to the E.U. itself.

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

Is the E.U. Relying Too Much on the IMF?

According to the New York Times, the IMF had more influence in the European debt crisis than did many E.U. states. Put another way, Christine Lagarde, head of the organization, became “a quasi head of state.” Without the advice and money from the IMF, the euro might have collapsed. If one could believe the rhetoric, the E.U. itself might have broken up. But the threat to the Union lies not in the euro, but, rather, on the emphasis on the state governments and in particular their respective officials. Indeed, the crucial role of the IMF during the debt crisis may have been in looking out for the interests of the E.U. in contradistinction to the various interests of the state governments. “In the absence of a strong federal government in Europe,” according to the Times, the IMF has helped “impose order on quarreling [state] leaders.” Put another way, if the balance of power in the federal system did not reside with the states at the expense of the federal government, the Europeans would not have had to rely on the IMF so much. For example, Lagarde played an important role, according to the Times, in “overcoming German reluctance to accept proposals intended to strengthen the euro zone, like a centralized bank supervisor.” Because the proposals involved shifting additional governmental sovereignty from the state governments to the federal level, the heads of the state governments faced a conflict of interest in assessing whether to support a federal regulator even though it would be in the interest of the whole.

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

JPMorgan’s Management: Overly-Defensive From Weakness?

According to the Wall Street Journal, at JPMorgan, the largest U.S. bank by assets, revenue in the first quarter of 2013 fell 4% from the same period a year earlier. The mortgage squeeze affected the firms' overall results. Net-interest income, which reflects the amount a bank makes from its loans, dipped 6%, to $10.9 billion, from a year earlier. Even so, J.P. Morgan's net income rose 33%, to $6.53 billion, or $1.59 a share, as a jump in investment-banking income and a cut in expenses helped cushion the mortgage pullback.

The full essay is at "JPMorgan: An Unethical Monstrosity?"

On the Roles of Mentors and Sponsors in Leadership Development

In the corporate world, distinguishing between a mentor, sponsor, and leader can be difficult. As people can get carried away in describing their roles, it is necessary to clearly demarcate the three. According to Sylvia Hewlett , mentors “act as  a sounding board or a shoulder to cry on, offering advice as needed and support and guidance as requested.” A sponsor is “a powerfully positioned champion” who offers “guidance and critical feedback.” Although appropriating “champion” from sports does not fit, the distinction between critical feedback and “support and guidance” is worth exploring.

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

Source:

Sylvia A. Hewlett, “Mentors Are Good. Sponsors Are Better,” The New York Times, April 13, 2013.

European Central Bank As Supervisor: Conflicts of Interest

Wolfgang Schäuble, the German finance minister, raised additional concerns in April 2013 about a proposal to create a single banking supervisor for the European Union. About 150 large banks would be under the direct supervision of the European Central Bank, which would also have the power to intervene to oversee smaller lenders. This proposal had been set as a precondition for states to draw on the E.U.’s bailout fund, the European Stability Mechanism, to recapitalize struggling lenders directly. To analyze Schäuble’s potential stumbling blocks, it is necessary to understand the conflicts of interest that are involved.

                                                                                 Wolfgang Schäuble, the German finance minister, active at the E.U. level. Source: The Telegraph.

The full essay is at "Essays on the E.U. Political Economy." Available at Amazon.

Taoist Business Leadership

Leadership from the standpoint of Taoist teachings is paradoxical or even oxymoronic in nature. A leader intending to apply the teachings should therefore be willing to tolerate the co-existence as apparent opposites, or at the very least be willing to lead in ways not typically thought to be consistent with leadership. If this seems too taxing, one might consider the potential benefits. For one thing, leading in unanticipated and unusual ways may give one a sustainable competitive advantage both in terms of alternative leaders below and competitors leading other organizations. Put another way, going down the rarely trodden path opens one up to being able to use something of value unknown to other people. One could “corner the market” on that asset.

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

Should Germany Prop Up the E.U.'s Southern States?

In April 2013, Deutsche Welle reported that the German central bank had “analyzed possible effect a domestic growth package could have on southern European economies. ‘By and large, it would have no impact,’ claimed Clemens Fuest, president of the Mannheim-based Center for European Economic Research. ‘We won't be able to fight recession in southern Europe with domestic growth incentives.’ He added that southern European states do not just have a demand problem. ‘Prices there have got out of hand,’ he said. ‘Wages and labor costs have spiraled out of control, and must be brought down again. If you were to implement a growth scheme, you'd only slow down the necessary adjustments.’”

The full essay is at Essays on the E.U. Political Economy: Federalism and the Debt Crisis, available at Amazon.

States Move Beyond Congress on Gun Control

On April 4, 2013, the government of Connecticut passed “a sweeping new set of gun control reforms.” Colorado and New York had already passed their respective versions of “sweeping gun legislation,” all in the wake of the Sandy Hook school shooting in Connecticut the previous December. 

The complete essay is at Essays on Two Federal Empires.

Bad Directors at HP: Like Guests Who Overstay?

Lest it be thought that Congress ignoring the business lobby would result in laws capable of reforming corporate governance in the U.S. in the interest of stockholders, even putting the “objectionable” stuff back into legislation may not be sufficient. In this essay, I look at the proposed elimination of plurality voting in the original Dodd-Frank bill from the perspective of the case of HP. Put simply, the question is whether it would have made any difference had the proposal been retained in the bill.


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.