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."

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.

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.

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

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.

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.

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

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."

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. 

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.

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.

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.