Archive for ‘Economics’

The One Eyed Man is King Among the Blind

By , 13 October, 2008, 1 Comment

Gordon Brown may have saved the world economy. Whether he can save his own career is still an unknown:

Last week, Brown unveiled his plan to combat the credit crisis: a transfusion of capital into UK banks in exchange for stakeholding rights, new requirements on lending practices, and government guarantees on inter-bank loans. Watch him explain the plan here. After a month of US and European governments waffling over the correct measures to take, after an American bailout package that passed but remains unpopular and unimplemented, Brown’s plan just made sense. As of today, those same European and US leaders are signing on to follow Brown’s lead.

Given how disastrous Brown’s run as PM has been thus far, it’s hard to understand where this stroke of genius came from. Until you take the longer view. As new Nobel winner Paul Krugman reminds us today, Brown is the economic brains behind the British revival that Tony Blair so often took credit for. While Blair travelled the world winning new political allies for Britain with his charm, the man behind the New Labour economy was the old curmudgeon from the University of Edinburgh, a former Blair rival who was blind in one eye. Blair was the better politician, but his Chancellor of the Exchequer, Brown, was the policy wonk.

So when the uncharismatic Brown took over for Blair last summer, and had to face political–as well as financial–responsibilities, he self-destructed. Despite valiant attempts to rebrand himself, his poll numbers have gotten worse every month since he took office…until now. That he might turn those numbers around with a policy that effectively nationalizes the banking sector suggests the final undoing of the free-market Thatcherite proposals that Brown and Blair were elected to reverse in 1997.

The question now is whether these nationalization policies can have their real economic effect (can “trickle down,” to borrow a phrase,) in time for the next elections.

Prof. Buffett?

By , 8 October, 2008, 1 Comment


Last week, I had a great time blogging the veep debate briefly considered doing the same for the presidential debate on Tuesday night. I’m glad I thought better of it, because the whole thing was a big bore. In fact, the ennui of it all was the only thing pundits agreed upon this morning. Otherwise, they were busy hashing out the same old attacks on each other, which is precisely what the candidates did themselves.

There WAS one surprising source of amusement, however, when both Obama and McCain said Warren Buffett would be on their short list for Treasury Secretary. I have misgivings about asking private sector experts to run public sector enterprises. Sometimes, as in the case of Mike Bloomberg, it works out great. Other times, a la Mitt Romney, it flops. The key is whether the expert can check their private enterprise mentality at the .gov door, since business and government just don’t work the same way.

A former teacher of mine put it well today when he compared working in public schools to independent ones. At a private school, you can accept only students you want to teach; at a public school you have to teach the ones you have. Similarly, Warren Buffett can “throw on his living room floor the balance sheet of any company he doesn’t want to invest in. You can’t throw millions of people on the floor.” A Treasury Secretary is like a public school teacher in the hardest inner-city school–you will never have enough books or enough time, but you still have the teach the kids you get. Could a man worth 50 billion and used to making his own choices face that?

Brooks is wrong, FINALLY!

By , 4 August, 2008, 1 Comment

For the last seven years (as long as I’ve been writing opinions pieces), I’ve had a grudging respect for the genius of David Brooks, referencing him in several columns and linking to him from most of the posts on this and previous blogs. That’s odd, because Brooks is a classic Burkean conservative, and I’m a pretty unabashed liberal, and most of the time I disagree with his policy proposals. What I like about Brooks is his social and cultural approach to political subjects, his explanation of elections and geostrategy through technological change or class hierarchies. He’s asking the questions I want to be asking, and even if we come up with different answers, our differences are matters of values, not a sign that one of us is more right than the other.

His most recent column, however, breaks the mold. For the first time in years, I think David Brooks is wrong and I feel like a cross between the child who finds out his parents aren’t superheroes after all and the proverbial martial arts student who defeats his master in one-on-one combat.

Brooks wrote on Friday about the rise of a multipolar world. America’s demise as THE single superpower will not usher in the rule of China, or India or Brazil or even a consortium like the EU, but the rule of nobody and everybody. To Brooks, this means we are doomed to anarchy, because any one power has the ability to cripple the international process–witness the collapse of the Doha talks and the lack of action on Darfur. He seems to think that the international process and international institutions depend upon the ability of a few (Perm5, G8 etc) players to keep everyone in line.

In fact, the opposite is true. Yes, the world has gone multipolar. Not in the sense that all powers have suddenly become equally powerless, but in the sense that different kinds of power are focused in different places. Technological power is centered on both sides of the Pacific; military power in America, China, Russia, and Israel; economic power in India, China, Brazil and if they get their act together the EU, political power in China, Russia, and the OPEC countries etc.

But instead of yielding a world in which no country can exercise whatever kind of power it’s got, the multipolar age means every country has an increased vested interest in the international process TO exercise that power. When you only control one small niche, and when that niche is part of so many global relationships (India’s economic power is all linked up with the technological power of Silicon Valley, for example), you NEED the international process to make your power valuable. The problem with our current international institutions is that their hierarchical setup isn’t suited to multipolar power dynamics. The P5 or G8 nations are unrepresentative of today’s power dynamics, but simply adding more countries (or bringing EVERYONE to the table, a la Doha) is inefficient.

Instead, imagine a United Nations with 3 or 4 possible Security Councils. Depending on the resolution up for debate, a different Council would be in session, allowing say Brazil to trump Russia if the topic is trade, but Russia to trump Brazil when the topic is disarmament. Just as individuals are dividing up their world in more niches as technology allows, so the international process can become more issue focused, allowing many powers to become the central pole of their own niche.

Dumb as we wanna be

By , 24 July, 2008, No Comment

Tom Friedman has a line about US energy policy—“dumb as we wanna be.” I’d like to apply the same to our policies in Pakistan. Right now, we’re pummeling billions into the Pakistani military to help us fight insurgent Taliban sympathizers on the Pak-Afghan border. This is a good cause, but giving a blank check and big arms shipments to the army, then waiting for them to do the right thing is a bad methodology.

First of all, as the NY Times reports, there’s no guarantee that the funds go towards counterterrorism. Secondly, by helping to expand the power of the military at the expense of civilian leadership, we undermine the progress of the rule of law. That’s been the case throughout the Musharraf years, but it’s even more so now when there’s a new democratic government who campaigned as an alternative to Mush. Thirdly, by encouraging the country to focus so myopically on its military, we feed the fire of a ballooning deficit and stalled economic development.

In the end, this “counter-terror” policy of ours promotes dictators over democratic leaders, martial law over constitutionalism and wasteful government spending over economic growth. But it’s when young people have no economic opportunities and no voice in government or in the law to appeal for change that they turn to radical alternatives like terror in the first place.

As Dumb As We Wanna Be.