Entrenchment and Inequality

Alexis de Tocqueville, found shipbuilding one of the more revealing of American occupations.  In Europe, shipbuilders used scarce wood (Europe’s forests were already rapidly thinning) to repair defects in existing ships; American simply scrapped old ships and built new, faster models using their unlimited wood supplies.  He was describing America’s “throw away” culture at its birth and noting its role in fostering innovation.  It also was a key in the development of our egalitarianism.  If you didn’t like the way you were treated at work, you could just take advantage of the abundant resources of an as yet unsettled continent to start your own business, or move further west. New ways of doing business were easy to discover. A study I monitored years ago found that expertise in new technology among subordinates forced more democratic management styles among supervisors.  It’s tough to be arbitrary when your employee knows more about stuff than you do. Technology works well as an agent of democracy.

 Rapid incremental innovations leading to quantum leaps are a hallmark of American culture.  We like to think of ourselves as discoverers of basic things, but most American inventions are exploitations of scientific discoveries made elsewhere; Einstein was German, Curie French, Fulton English, Watt Scottish, Bell Canadian, Marconi Italian and genetic engineering an outcome of the English discovery of the structure of DNA. We worry that our scientists are not doing enough basic research, but that has never really been our special talent.  We import that.

Our real talent for innovation owes a lot to low entrenchment, the weight of infrastructure tied to existing technology that must be overcome for a new innovation to be successful. Trains have rail beds, cars highways and gas stations, all-electric homes a national network of power lines. The entrenchment of TV actually helped spread the internet, as cables laid to increase TV coverage became also a vehicle for the internet.   And there are social entrenchments too.  Just think how hard it is to sell mass transit and car pooling to a public hooked on solitary drives to work and the status tied to a sporty sedan.  But just as rapid innovation begets egalitarianism, entrenchment can also slow change and  beget inequality.  The owner of scarce, required resources acquires an edge, and hates to lose it to something new.  The economic capital of the country belongs to owners of the existing technology, who fight losing it to something new.  That’s how the rich stay rich and the poor stay poor.  Samuel Morse got his idea for the telegraph from a semaphore system in Europe and struggled for years to have it patented there; it was too big a change from the status quo for the French.  Meanwhile, it got rapid acceptance in America because it solved a problem and wasn’t replacing anything.

The current recession owes a lot to the struggle between innovation and entrenchment.  I am one of those scruffy, disreputable technologists who place credence in Kondratiev “long wave” economic theory; American mainstream economists look down on it, partly I suspect because it’s of Russian origin, even though Kondratiev was executed by Stalin. They argue that it sees patterns in economic data where none exist; but it’s held in higher regard elsewhere.  I appreciate the skepticism, but find the basic logic of the theory persuasive, without regard to details of the length of cycles, relative strength of credit versus technology cycles, etc.  All those things can vary without destroying the fundamentals.  Kondratiev theory in the form I accept posits that our economy is historically characterized by a succession of driving technologies that at any given time dominate major sectors of the total economy.  Think lumber followed by railroads followed by steel followed by autos followed by oil followed by computers – you get the picture.  Each of these dominant technologies has its own cycle which begins with a highly productive expansion followed by mature exploitation followed by a bubble as efficient limits are hit while capital investment continues to flow into the sector followed by stagnation and recession. I’m greatly oversimplifying and leaving out things, but again, you see that the basic idea is that economic cycles arise out of the dynamics of changing technology. The recession serves to transfer investment interest from stagnant sectors to emerging technologies that will begin the new cycle.

The recession phase is where entrenchment and inequality rear their ugly heads.  The quickest way through such a recession is rapid redeployment of capital to emerging sectors of the economy.  In the present recession, for example, fossil fuels are hitting their efficiency limit as the costs of extraction rise higher and higher, housing is facing a demographic wall as baby boomers retire and finance is facing a crunch as the overuse of broad monies such as derivatives and swaps forms a bubble.  The logical alternatives are investment in renewable energy, exploration of nanotechnologies, particularly in medicine, mass transit systems and investment in renewal of America’s failing infrastructure.  But over-entrenchment of oil and autos, for example, is slowing or preventing the rise of such alternatives.  And the excessive wealth of those invested in the status quo insulates them from immediate consequences.  In a significant way, that is at the heart of the current election debates.  Obama is spokesman for economic change and the transfer of support to emerging technologies; Romney, for continuation of the status quo. The result of the election will shape the economy of America for the next decade.

Esoteric Piracy

Most people don’t realize how relatively brief the reign of Caribbean piracy was.  When I was growing up, enflamed by the swashbuckling glories of Errol Flynn movies like Captain Blood and The Crimson Pirate and the lurid tales of Bluebeard and Captain Hook and Henry Morgan, I imagined piracy to have been around forever.  Perhaps I was right, but the peak of the Caribbean form lasted only about 25 years.  Many of them justified their piracy as part of England’s never-ending hostilities with Spain, including in their attacks Spanish treasure cities like Porto Bello, Cartagena and Maracaibo, and were licensed to do so by letters of marque designating them as privateers.  While active, the piracy did form a serious threat to the treasuries of Spain by converting the valuable cargoes from the New World into contraband, but it also wrecked havoc on the cargoes of other nations.  Then the British found the solution by hiring Henry Morgan as Governor General of Bermuda with the mandate to catch and hang all the other pirates.  It worked.

But piracy endures, often in much more esoteric forms.  This week, for example, the news is full of the Libor scandals of Barclay’s Bank, which is now spreading to banks like Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc, UBS and the Royal Bank of Scotland, and of the settlement of the suit against Wells Fargo Bank for predatory lending.   Libor is the London inter-bank offered rate, used for determining many other key interest rates, including those for mortgages, student loans and variable rate loans to individuals, institutions and governments. The banks are accused of manipulating the rate by hiding key data, thereby raising the costs for their customers and the profits for themselves. The costs, for example, of bonds to the city governments issuing them are said to be raised in some cases by millions of dollars, causing the cash-strapped governments to have to cut back on police, fire, school and other municipal services in order to cover their lending shortfalls.  Barclay’s itself settled for $450 million, but the criminal investigation of employees continues. Wells Fargo settled for $175 million the charges brought by Baltimore that Wells Fargo targeted minority customers for mortgages at exorbitant rates that they knew the customers could not pay, leading to foreclosure.  The foreclosures spiked the cost to Baltimore of city services generally, especially police and fire services, of course in the process devastating the lives of many.  Both banks deny wrongdoing.  Before them it was the Deutsche Bank and Goldman Sachs raid on Greece, the JPMorgan derivatives scandal, etc., etc. 

What these present pirates share with pirates of the past is their proclivity for pillaging the rich cargoes of the world while flying the flag of legal activity, while concurrently starving governments of their revenues, devastating cities and earnestly proclaiming their own virtue. They just have more sophisticated deniability.  Where they differ is that the wealth of prior pirates often at least partly benefited the poor. 

We truly have entered a new golden age of piracy.  Interestingly, the New York Times points their finger at a cause for this that I have mentioned before, the growing disparity between rich and poor.  In the America of 50 years ago, the ratio of CEO compensation to average worker pay was 40, and the Harvard Business Review tut-tut-ted about it.  Today it is over 140, and many aspiring managers are desperate to make the leap into CEO consideration.  The temptation to make money and a name by skating at the edge becomes overwhelming.  It is a price for inequality we should not be prepared to pay.

Rational Ignorance

In one of the great moments of Star Trek, Captain Kirk explains how he became the only cadet ever to solve the Star Fleet Academy’s ultimate challenge: he cheated.  And millions of Star Trek fans simultaneously muttered, “Oh No!”, and “Yes!”  That’s the way we humans are, torn between our desire to follow the rules set by others and our instinct to win, by hook or by crook, our own personal victories.  Edward O. Wilson, the evolutionary biologist, attributes this to a divided nature engendered by the evolution of genes both for selfishness and for cooperation.   Philosophers and theologians have from ancient times attributed it to a divided, multi-level soul, or Original Sin, or the temptations of Satan; Freud described it as a struggle between a primitive Id and a rational Ego; and Carl Sagan theorized it as a vestige of brain evolution that simply piled social “mammalian” structures on top of tooth-and-claw “reptilian” brain foundations.

Whatever its root causes, we have developed many mechanisms for making our divided nature work for us.  One major one is our ability to compartmentalize our world into mutually exclusive views that we can handle neatly with one part of our nature or another:  sacred versus secular, Oktoberfest versus the rest of the year, business versus family, rational versus emotional.  Cheating is ok on government regulations but not ok on the golf course.  We shoo away “the better angels of our nature” in order to calculate our personal profit undisturbed.  We blame others as responsible for their own problems when in fact we have initiated them, the “not my problem” defense.

One form of this compartmentalization is what economists call “rational ignorance”, the tendency not to bother to learn about or to ignore what does not affect us personally.  It’s a kind of cheating.  We cut problems down to a workable size by ignoring large parts of them.  It makes reporters think that our only concern at election time is the impact of our choices on our wallet.  It makes us ignore the impact of our agricultural, environmental and energy policies on the poor of Africa or of Southeast Asia.  It makes us not care about the locations of Pacific island countries that may be drowned by global climate change.  But as our world has shrunk and our technology become gigantic, the need for cooperation has escalated, the groups which must cooperate for survival grown larger and the meaningful relationships become ever more complex.

This week the newspapers report that African famine has led to a sharp rise in the forced marriages of young girls as families “dump” them to lower family food costs, that neo-Nazi anti- immigrant clashes have risen in Greece because of the societal unrest produced by the European debt crisis, that it took two separate multi-national teams, each of 3000 scientists, to confirm the existence of the Higgs Boson, that Kansas faces rising deficits because of prior tax cuts meant to reduce the costs of state government, that China will by 2050 have a shrinking population with a median age of 50, higher by 10 years than the median age of the U.S. and no longer able to function as the factory hands of the world, that Russia faces “a wall of water” from torrential rains, and that Midwestern farmers, the breadbasket fillers of the world,  face declining crop yields as the U.S. endures the warmest twelve months on record.  Which of these is "not my problem"?

I doubt the mind exists that could fathom the growing complexity of global relationships, but one thing is clear.  We need ways to cut down on our rational ignorance and care more about what is happening elsewhere.  Our neighborhood is now everywhere, and our neighbors’ problems are ours. We can no longer cheat on the situation by just ignoring the pains and issues of others.  Ignorance is no longer rational.  A renewed emphasis and funding of higher education is needed, and we need to lean more about our world every day. .  Concern for "our neighbors" in the lost parts of the world is needed more all the time; it means a lot, not only to them but to us as well.  Think about that as you make your political and economic choices this year.

Getting a Life

One of the most, for me, provocative little essays I have ever read was one years ago in The American Scholar, about an orange Nehru shirt and a brown knit suit.  The author, whose pseudonym was Demosthenes, wrote of a recurring nightmare in which, on a visit to Los Angeles, he was killed in a car accident, and remained unidentified. The nightmare was that he was then buried wearing that orange shirt and brown knit suit.  Demosthenes’ point was that we get so wrapped up in choosing life styles (Nehru shirts and brown knit apparel were endemic at the time) that we forget to choose actually living and, in the process, lose our real identities.  Living involves far more than a fashionable suit.

On this day after Independence Day, fresh back from a week at the beach, I am intrigued by how we as Americans so focus on the right to Liberty  enshrined in the Declaration of Independence that we forget it was only second on Jefferson’s list, sandwiched in between Life and the Pursuit of Happiness.  For after all, what is Liberty without Life, and what is the meaning of an unhappy Liberty?  Jefferson was writing about the functions of government, and since then, we’ve all agreed that he basically got it right. Nevertheless, politicians and columnists still ponder whether the role of government is to provide safety nets, or stay out of the way of business, or provide a properly regulated environment, or whatever.  The answer of course is “all the above.”

Following Jefferson’s thoughtful construction, we can see that a primary function of government should be to help enable each person’s living a life best suited to their own skills and goals and vision of happiness, in part by standing protectively in the way against things like poor education, bad health care, and inadequate access to all the shared goods and services that together form our modern civilization; in other words, to protect the right to live your own life as best you can.  We sometimes forget that the author of the Declaration of Independence felt that his greatest achievement was the furtherance of public higher education.  That view is a broad definition of safety net that goes beyond the limited poverty elimination usually associated with that term.  Equality of incomes or of outcomes is not implicit in such a safety net, but a far more powerful role of government is, beyond the “defense only” view of libertarians but short of the equality of everything views of radical egalitarians.  Much more of this broad function of government is contained under the “promote the general Welfare” clause of the Preamble to the Constitution than we often are willing to accept.

Such a broad view of the role of government as that possessed by the founding fathers cannot be achieved without cooperation and accommodations from all.  That is the task now before us as a nation: to move beyond a nearly blind focus on “Liberty as no restrictions whatsoever” to recognition of Liberty as a shared enabler of all of us living better lives together.  We have for too long chosen a radical individualism life style at the expense of our identity as a people.  It’s time to wake up.

Mending Wall

One of the small ironies of the immigration issue is that Mitt Romney is the first generation child of an immigrant from Chihuahua, Mexico.  His father, George Romney, was born in a Mormon colony in the Chihuahua mountains and went on to be governor of Michigan, evidence that some immigrants can aspire to high places, just not poor brown-skinned ones.  Viewed that way, Mitt’s immigration positions are remarkably similar to the common story of the affluent city couple who moves to the suburbs for all they have to offer, then looks askance at new couples moving in from the same old neighborhood because of what they might do to home values in the new place.

Immigration has always had a dark and twisted history that way.  New Englanders, themselves the descendants of tormented pilgrims, looked down their noses at the unruly Irish, iron miners in Minnesota whose ancestors came from different eastern European countries had to be sent down into the mine in different elevator loads to avoid fighting between groups, and the U.S. fought a war with Mexico to claim territory for its own settlers which had been the home of some Latino families since before the pilgrims first  landed. We then began questioning the citizenship of families who for centuries had routinely travelled and had family ties across the new border, and demanded they prohibit the easy access of their cousins.

America is in a curious position as a country whose wealth and fundamental values have been shaped by the often forceful migration into others’ territory by its own peoples and by the countless migrations of the hopeful poor into and all throughout the country, and yet is apprehensive of whoever are the newest people on the block. We are always moving somewhere else, yet we constantly mutter about building walls to keep out the criminal types.  But we’re not very good at it.  To paraphrase Robert Frost, something there is in us that doesn’t like a wall.  Frost also wrote, “Before I built a wall I'd ask to know what I was walling in or walling out, and to whom I was like to give offence.”  We tend not to do that, and it costs us.

One of the big ways it costs us is that we, particularly the baby boomers, as a country are growing older and less able to handle the tasks and acquire the viewpoints of the young.  The turnover of work from the old to the young has before been handled by calling up the next generations; but the numbers of American born young people who can harvest our salad and write our software and care for us in a hospital are growing fewer and fewer. Such gaps have always been handled through immigration of young, willing hands, and we need millions more of these than we have, just to compensate for our growing old.  There are communities in our country that are dying because our immigration policies deny them the workers they need to survive.  Other countries, such as Japan, with declining population growth visibly stagnate when an anti-immigration ethos prevents renewal of the workforce. But we are blindly building walls without understanding what we are walling out.  Romney’s suggestion of a permanent visa to those who earn advanced degrees is almost comical that way; he will understand better when he, or someone he loves, stays in a hospital without adequate staff.

It costs us more morally.  As soon as we open the door of our new house, we seem to forget why people seek to move.  The pilgrims did not leave England to get rich.  People do not sneak past border guards with rifles and crawl through miles of desert in blazing heat and without food or water simply to live in a big house with water sprinklers.  They do not come only because they want to.  They come because their children are starving, or because of severe oppression.  Many will return for retirement to their native land, because that will always remain their home.

They come out of sheer desperation, and with vast regrets.  And they come without permission because the immigration quota system is so stacked against them that it can take ten to twenty years to work their way up the line to eligibility for legal entrance.  A family can starve in much less time than that. George Romney was lucky that way; his family came into the U.S. about 1912, just before the quota system was established in 1920.  A few years later in their immigration effort, and Mitt might not even be a U.S. citizen.    A wealthy, well educated Greek couple we know, with property in the U.S., tried for many years to obtain permanent resident visas, and the queue was so long for them that they finally gave up.  Imagine the lot of a Mexican farmer with children starving because NAFTA has destroyed the economy of his village.  A work visa or U.S. citizenship is for him the impossible dream, and he knows it.

Our moral and economic blindness is hiding the obvious: we need immigrants of all types, and they need us.  One obvious resolution would be permanent worker visas not limited by quotas or education levels or by a requirement not to return for periodic visits to a country of origin; that could both enable that farmer to feed his children without desperation or regrets, and provide the 2 million immigrants per year that the Federal Reserve says we need to keep our economy going.  We need to remove our blinders and find ways not just to mend walls but to tear them down.   

Hanging Together

What people don’t talk about, we all know, is sometimes the key to understanding what really happened – derelict relatives, failed businesses, dreams that just didn’t pan out.  One of those silent periods in American history is the 1780s era of the Articles of Confederation.  We learn the Articles existed, but as with an aging actress’s face, no close ups are permitted, and a mist blurs all details. Largely that is because it was a period of economic and political shambles, which later could only be remembered as failure.  The American quarter coin is known today as two bits because back then, the American monies were so worthless that merchants often accepted only Spanish pieces of eight, which, when “bitten” into fourths for smaller purchases, were called “two bits”.  The former colonies were so loaded with Revolutionary War debt that they were each essentially bankrupt.  No coherent domestic or foreign policy existed, for lack of any real central authority.  Pockets of poverty and suffering were everywhere.  Too painful to recall, it’s glossed over in our introductory history classes. 

But out of that failed era came a Constitution and a new country.  Three great leaders played key roles; and no, they didn’t include Washington and Jefferson.  Ben Franklin coined the phrase “The United States of America”, words that resonated in the hearts and minds of people throughout the loosely allied former colonies; his advocacy made the new country a vision to be achieved.  James Madison wheeled and dealed and presided over the convention convened from sheer desperation to piece together a Constitution acceptable, barely, to all.  And Alexander Hamilton sealed the deal by coming up with the idea of having the new country assume the war debts of its constituent states, relieving them of bankruptcy; then, as first Secretary of the Treasury, he made it work with a centralized currency and economic policies.  His proposal effectively transferred economic sovereignty from the individual states to the new country.  If we remembered all our history, they too might be on Mt. Rushmore.

I think of back then when I read the current news on Greece and the European debt crisis.  Greece has suffered by far the most throughout the crisis, but in yesterday’s election, evinced willingness, barely, to stay the course and work toward a healthy EU.  The vision is still alive, and that’s a start.  What comes next will be the difficult part.  John Lanchester, in the Comments section of this past week’s New Yorker, points out that the solution to the economic crisis is obvious, but no one wants to buy into it.  He includes federalizing Euro debt and spreading it across the whole Euro zone, creating Europe-wide institutions to supervise currency and debt, and adopting a Europe-wide strategy for economic growth that would include structural reforms and improved competition;  In other words, the Hamilton proposal.

Germany is opposed of course because doing so would eliminate what amounts to German economic hegemony over the rest of Europe, while having Germany also shouldering other nations’ debt in a major way. A growth plan for all Europe could entail Europe-wide deficits that could weigh on prosperous northern-European economies, and all the individual nations recognize it would entail a surrender of sovereignty to the EU. But all are recognizing now that the austerity program is not working and some other solution is required.  The task of getting agreement on such a solution would daunt even a Madison, since it would involve getting nations to rely on each other who have sometimes been enemies over the centuries, a problem even Madison did not face.  Just as in the 1780s, the only big things going for a solution are the vision, this time of a united Europe, and the sheer desperation of the parties involved.

One of Ben Franklin’s famous statements was “Gentlemen, let us all remember that if we do not all hang together, we shall all surely hang separately.”  The nation whose sovereignty and economic viability has been most obviously threatened so far is Greece, by what I characterize as corporate raids on its Treasury.  But if solutions are not reached, others, from Spain to Italy to Holland to Ireland and eventually to Germany, will surely follow one by one.  It is time for all parties to find accommodations with each other.  Out of that may rise a union that, like the United States, may cause us to forget the bitter era that went before.

Legal Tender

I remember the first time it happened:  I was at a conference in San Diego in the early 1970s, and my money was no good.  The conference hotel refused to accept cash, honoring only credit cards. Filled with righteous indignation – after all, the dollar bill reads “legal tender for all debts public and private” – I nevertheless paid with my card, sensing I had entered a new world. Paper no longer had value; all worth was electronic.  We’ve come a long way since then, far longer than most of us realize.  At a meeting I attended this week, one person commented idly that he never carried cash any more, preferring simply to swipe his credit card.

On a given day, the total transactions volume of world currency markets is about 4 trillion dollars.  However, David Rothkopf, in Power, Inc., estimates that of that 4 trillion, only about 1.25 trillion involves actual currencies. The remaining 2.75, over twice the physical currency amount, involves one or another forms of derivatives.  While not counted as officially money (M1) or near-money (M2) by any nation, derivatives are rapidly becoming, or have already become, the multi-national electronic currency of the world.  They constitute a medium of exchange between financial institutions independent of any one country’s economy or economic policies, and are not regulated in any meaningful way.  Their visibility in the official data is practically zero.  Yet, as the debacle in the Euro zone shows, they can wreck havoc to any nation’s economy (the role of credit default swap and cross currency swap derivatives in the Greek debt crisis is one of the more lurid tales in financial history:  http://www.bloomberg.com/news/2012-03-06/goldman-secret-greece-loan-shows-two-sinners-as-client-unravels.html  presents its murky outline.)

The total value today of the world’s physical currencies is estimated at 8 trillion dollars by Rothkopf, while the total value of the world’s derivatives is about $791 trillion.  That amounts to about 14 times the GDP of all nations of the world combined.  In macroeconomics 101, you learn that the ratio of money over GDP is a factor in creating inflation (how important a factor is a subject that economists love to argue about.)  When considering the role of “broad money”, the situation has all the earmarks of the world’s most giant bubble just waiting to burst.  Put another way, if all derivative contracts suddenly were sold for cash today, payable in physical currency, only about 1 on 100 dollars could be paid, and the global currency market would be demolished.  Of course, that couldn’t happen, but enormous risks exist. For example, since the repeal of the Glass-Steagall Act in the 1990s, banks have been permitted to mix their derivatives accounts with their commercial accounts, thus providing a measure of backup to their highly risky derivatives activity by the FDIC.  Failure of the bank from derivatives activity unlocks the taxpayer's wallet to cover the bank's losses.  And events like "too big to fail" bail-outs are precipitated.  Reenactment of Glass-Steagall provisions requiring separation of investment and commercial banking is a necessity.

The real story behind all the statistics is the rapidly waning financial power of governments versus corporations.  Major corporations prosper while governments cannot pay their bills.  And once again, governments are charged with responsibility for the general welfare of all their citizens, while corporations seek only the financial welfare of their investors.  A new, broader way of defining corporate goals and regulating corporate behavior must be found, while it still is possible.  If not, the future will more and more resemble that of the uncaring tyrannies of ancient times, not a step forward but, two steps back.

Business As Usual

What with the European debt crisis, Syrian atrocities, and election year politics, the topic of climate change has been the quiet corner of the plate lately.  From the evidence of my in basket, that’s likely to change soon.  First, as the Rio+20 Earth Summit gets set to convene, June 20-22, various international agencies and research groups are reporting their latest findings, and the picture looks grim.  The UN Environment Program reports there has been progress on only 4 out of 90 measures to combat climate change that were previously agreed on by the UN; indoor air pollution is causing 2 million premature deaths per year, almost half of them children under 5 years old; the target for cutting the loss of endangered species has already been missed; and 43 percent of the world’s land surface has already been radically changed by human activity, with a likelihood of 50 percent change by 2025.  The last time such massive change occurred was a 30 percent change about 11,000 years ago which precipitated the last ice age.  A major impact this time around is the drastically increasing desertification arising from global warming which, along with the major urbanization of the earth’s human population, is removing arable land for food production just when it is more and more needed.  Some research indicates that in the last 40 years, the human use of the biosphere for food production and industrialization has risen from its then level of 85 percent of biosphere reproductive capacity to a current level of 150 percent.  On the face of it, humanity cannot continue what it is doing.

A new book, 2052: A Global Forecast for the Next Forty Years, by a long time Norwegian modeler of global change, Jorgen Randers, predicts it is already too late and that environmental and socioeconomic collapse by the end of this century will cut world population in half.  The case is likely being overstated, but nevertheless indicates grim times ahead, if not for us, then for our children and grandchildren.  The reason, Randers reports, is that of several possible modeling scenarios, tracking data indicates that humanity is following the “business as usual” scenario, which leads to some of the grimmest results.  It is ironic to use that term, business as usual, since that is the fact of life in a corporation dominated world.  Humanity may be dying of its own prosperity.

To multi-national corporations, global change is an externality, economics language for “not my problem.”  But of course it is.  The UN reports, for example, that international trade is the cause of 30 percent of endangered species extinctions.  Industrial pollution from fossil fuels is a major factor in climate change around the world.  This week’s controversy over soft drinks has revealed that Coke had an at least informal goal of “taking over the majority of people’s stomachs” with its products; these products were, through their dominance of corn production capacity and prices, in turn creating agricultural and human crises in third world countries.  And it is corporations who have, through their massive lobbying for their own interests, brought governments, officially the entities responsible for dealing with global change, to a standstill on taking effective action.  For the sovereign power to regulate commerce is the key to solving these issues of all humanity, and in our global world, corporations have left it a governmental power in name only.

Twenty years ago, the Washington Post reports, the first Rio Earth Summit produced 3 major treaties intended to head off dire environmental outcomes; those goals were never achieved.  Predictions from expected participants are that RIO+20 will produce no further significant formal agreements. There is still some room for optimism, though, as participants ranging from the UN Secretary General to a vice president of the World Bank voice their expectation of a common understanding and informal agenda to be carried out through regional organizations and a “cloud of commitments” along with concrete pledges from businesses, governments and non-profit organizations.  In other words, major sovereign governments are being bypassed by the problem solvers.  If this approach is effective, it is another nail in the coffin of the sovereign state.   If not effective, the situation is dire indeed.

Perhaps it’s time to turn the problem over to the Episcopalians.  At a prize day convocation yesterday at my grandsons’ Episcopal school, the chaplain included in her invocation, “You have blessed us with the care of Your creation”; in view of the news of the week, I was struck by that juxtaposition of "care of" with "blessed."  If only we, from our own lawn tending to the largest multi-national corporations and to world governments, could lift our vision to recognize that care of the planet is not someone else’s problem, but our own.  And that caring for it need not be only an unwelcome chore that gets in the way of “business as usual”, but an actual better way of doing business, and of living.  That would be blessing indeed.

To Music

This post is by way of a pause to honor one of the great formative forces in my life – Music.  My first memory is of darkness, and of singing.  I was a 3 year old in the orphanage where I lived for 4 years after my father died, and it was after lights out in the nursery. We broken hearted toddlers were singing the only song we all knew, “Jesus Loves Me”, to comfort ourselves in our new loneliness.  Singing was our expression of hope, and while that first memory was just a flash, music has stayed with me ever since.

I once considered studying to be a professional musician, but knowing the puniness of my talent, chose instead to keep singing not just as an occupation, but as a way of life.  I attend concerts, play CDs, learn its techniques and history, and I sing.  I sing in choruses and choirs, sing getting up in the morning, sing nonsense songs to my grandkids.  I even find myself communicating with my unconscious through music; when I suddenly start humming a tune, I have learned to pay attention, for my subconscious mind may be telling me something.  My voice is baritone, so of the great musical artists of our times, I particularly honored and appreciated Dietrich Fischer-Dieskau; to me, he was the greatest singer of the 20^th century.  So I mourn his death last week, and thank him for all the beauty he brought to an often ugly world.  This post partly is my response to his passing.

Music is an expression of our hope, our anger, our joy, our love, our sadness and a thousand other emotions. It is often truer and better at expressing who we are than are our words.  Like a picture, it is often worth far more than a thousand speeches. My favorite poetic metaphor is from John Donne's final poem, written on his death bed, where he describes himself as "entering that great room, where with Thy saints, I shall be made Thy music."  Brahms worked years on his German Requiem as an expression of his grief for his mother, and it says things words alone never could.  Some people think music may be not just A way of life, but The way of life, and a universal language.  Anthropologists note the role of work chants in fostering the group cooperation that characterizes humanity, and report how primitive peoples never previously exposed to western music love Mozart for his rhythm (who could blame them?).  In The Silmarillion, J.R.R. Tolkien suggested that creation began as a song of the Creator, and so, interestingly enough, does the mythos of the Aborigines.  That bemuses me when I learn that some variations of String Theory in cosmological physics describe matter, energy, and everything we know as the universe arising from the harmonic overtones of the infinitesimal strings.  Without a Song, we possibly wouldn’t be here.

If so, we have ourselves created ugliness as well as beauty out of the basic stuff of the universe.  Somewhere, perhaps, a Cosmic Choir Master is glowering.  It’s up to us to learn our harmonies, and to practice together until we get it right.

Wealth and Happiness

The European debt crisis is reaching the boiling point, as are European finance ministers.  Yesterday, the head of the European Commission, the executive arm of the EU, lectured its assembly about the urgent need to come up with a unified economic policy across the EU community.  This reflects, and emphasizes, the point I’ve made before, about the tension between EU sovereignty and the sovereignty of its individual members.  For a common, enforceable EU economic policy would in fact be a declaration of sovereignty of the EU over the nations that compose it, going a long way toward converting it from a federation of independent states into a unitary sovereign state in its own right.

That  is the preferred solution to the crisis for finance ministers, who always prefer a unitary authority to make their jobs easier, and it represents one extreme in the range of solutions, one not likely to be adopted in anything like a pure form.  The other extreme of the solution range would be dissolution of the fixed relationships between the Euro and national currencies, also not likely.  For it would reclaim the economic sovereignty of each member nation, leaving them to set their own courses toward salvation or disaster, and in the process abandon the many gains they have made together.

There is a curious tension between the power of sovereign states to set economic policy, an adjunct of the power to regulate commerce, and the power to set the value of currency.  Traditionally, sovereign revaluing of currency has been a solution to end or ameliorate national debt crises.  If Greece or Spain or Portugal had the sovereign power to revalue their currencies, they could have repaid their foreign debts with considerably less stress than has been the case.  But countries have surrendered their power to control their own currencies to an international money market, operating between multinational financial corporations which daily revalue it in relation to the major currencies of the world. 

The big step in that direction came in 1971 when, interestingly enough, the U.S. converted its currency  to a fiat currency under pressure of a run on gold from the Deutsche Bank.  By declaring it no longer convertible to gold, the U.S. made the reserve currency of the world fully subject to the market fluctuations of the international currency market.  But nations perceived as having differing economic policies will have their currencies differently valued in the international market.  By requiring a fixed exchange rate between the drachma and the euro, the EU is thus dictating the need for a common EU economic policy.

The deeper issue is that financial institutions operate by economic policies, while nations operate by socioeconomic policies.  That is because financial institutions seek as their objective to maximize the economic return, measured by monetary profit, to their investors, while nations seek “the general welfare” of their people.  Financial institutions can’t help it; their hands are handcuffed by fiduciary requirements which prohibit  goals other than maximizing returns on investment; nations also must answer to the needs of their people, even when it requires debt.  A too simplified solution to that dilemma has been in use since 1934 through the use of GDP (which began as GNP) as measuring rod.  But that just aggregates financially measurable activities into a nice round number, leaving aside things like education levels, pollution, income disparities and the like, which are equally the responsibilities to manage of sovereign states.  A nation which chose to lower its GDP to increase the happiness of its people, like some traditional nations which have rejected “modernity”, would be regarded as backward or insane, but a nation that bases its socioeconomic policies solely on the effect on GDP is not likely to be a contented nation.  China maintains one of the fastest growing GDPs in the world, but remains way down the list on many other scales.  You are what you choose to measure. 

So solutions to the debt crisis will lie in the middle, acknowledging the need for both fiscal integrity and responsiveness to the needs of people.  The EU chairman is right.  A unified policy for the EU is needed.  But it must go beyond simple financial goals to include more than just fiduciary requirements.  A movement has been afoot already in Europe to extend our national obsessions with measurement to include some of these other societal issues into what is sometimes called a “happiness index”.  Perhaps some of the preliminary results of those efforts might prove useful.  And perhaps fiduciary rules might be relaxed to enable actions “for the public good”, such as debt forgiveness, and to prohibit actions “against equity and good conscience”.  Already,  under American law governments are subject to that prohibition in financial actions against individuals.  Whatever the solutions reached, they must enable financial interests and governments to work together toward common goals. Extreme solutions are not in the interest of either.